Update on innocent spouse relief.

• Author: Ely, Mark H.

Since the enactment of the Internal Revenue Service Restructuring and Reform Act of 1998 (IRSRRA '98), taxpayers have been enjoying the benefits of liberalized rules for innocent spouse relief. Former Sec. 6013(e) enumerated a list of strict conditions that resulted in denial of most applications; under new Sec. 6015(b), (c) and (f), a taxpayer may generally qualify for relief on a jointly filed return under one or more of the following circumstances:

1. One spouse establishes that, in signing the return, he did not know (and had no reason to know) there was an understatement of tax attributable to the erroneous items of the other spouse, or did not know the understatement's extent;

2. A divorced or separated individual requests allocation of a liability, so that he becomes responsible only for the portion of the deficiency allocable to that person; or

3. A taxpayer is not eligible for relief under one of the first two categories, but it would be equitable to grant relief, given consideration of the facts and circumstances.

(For a full discussion of the provisions, see Foran and Foran, "Innocent Spouse Rules Provide Relief" TTA, Jan. 2000, p. 26.)

Initial Cases

Cases filed under prior law have been considered under the new provisions. In the first half of 2000, the Tax Court handed down three decisions that addressed whether it had jurisdiction to review an IRS denial of relief requested under Sec. 6015(b), (c) or (f). In Field Service Advice 9929019, the Service agreed that the Tax Court had jurisdiction to review denials of requests under Sec. 6015(b) and (c). However, because Sec. 6015 (e) explicitly sets out the rules for petitioning the Tax Court and the equitable relief provision is spelled out in Sec. 6015 (f), the IRS strongly contended that the court did not have jurisdiction to review denials for relief under Sec. 6015(f). However, in Michael B. Butler, 114 TC 276 (2000), and Diane Fernandez, 114 TC 324 (2000), the Tax Court disagreed. In each case, the taxpayer had requested relief under Sec. 6015(b) or (c) or both, as well as under Sec. 6015 (f), and, in each, the Tax Court held that it had jurisdiction to review a denial of Sec. 6015(f) relief.

In Thomas Corson, 114 TC 354 (2000), the Tax Court pulled together different parts of the statute to support its ruling that a nonelecting spouse should receive notice and could be a party to considerations, when the Service had granted the electing spouse relief. (See News Notes...