Expanded Innocent Spouse Relief
IRC section 6015 allows certain taxpayers to claim relief from joint tax liability if they qualify as an innocent spouse. There are strict qualification rules. Recently the Tax Court allowed a taxpayer to raise the issue even though she failed to meet all the qualifications.
Dorothy Clark was married to Edward Wenner. He died in 1988. Following his death, the IRS audited the couple’s joint returns for 1982 to 1984, assessing $11,500 in additional tax and $24,000 in interest. Clark paid the tax but not the interest. In 1997 she asked the IRS to abate the interest. It denied the request in 1999. She filed suit in the Tax Court claiming the IRS had abused its discretion under IRC section 6404 in not approving her abatement request and asking for relief of liability as an innocent spouse under section 6015. The IRS objected to the court considering her innocent spouse petition on the grounds it was not filed properly.
Result. For the taxpayer—in a case of first impression. Normally, to obtain innocent spouse relief, a taxpayer must comply with the requirements of section 6015, which include filing a timely election, receiving a denial of the request and then filing a timely petition with the Tax Court. Based solely on section 6015, Clark was not entitled to innocent spouse relief because she had failed to meet the requirements, including filing a timely innocent spouse petition with the Tax Court.
However, in this instance, Clark had filed a timely petition to have the interest abated. Once a taxpayer is properly before the Tax Court, it may consider all affirmative defenses. Therefore Clark had the right to have the court decide if she was entitled to innocent spouse relief. The fact that she had not met the normal requirements was irrelevant.
This decision may open the door for certain taxpayers to have a second chance at claiming innocent spouse relief. If they legally can bring a suit before the Tax Court on the years at issue, they should consider raising this affirmative defense in addition to any other issues. This will aid taxpayers who failed to meet the time requirements in section 6015 but who are now in the process of disputing the tax or interest liability for the years in question.
Estate of Edward Wenner v. Commissioner, 116 TC no. 22.
Prepared by Edward J. Schnee, CPA, PhD, Joe Lane Professor of Accounting and director, MTA program, Culverhouse School of Accountancy, University of Alabama, Tuscaloosa.