Till Death or § 6015(E)(4) Do Us Part

The Tax Court recently decided an issue of first impression concerning innocent spouse relief, describing it as “a small but noticeable gap in the tax law”: Does the right of a nonelecting spouse to intervene in an innocent spouse case continue after the nonelecting spouse’s death? The court answered in the affirmative.

6015 provides relief from joint and several liability arising from the filing of a joint return where one of the spouses did not know and had no reason to know of a deficiency on the return. The IRS cannot assert the deficiency against a taxpayer granted this relief but can enforce collection only from the other, nonelecting spouse. Section 6015(e)(4) gives the nonelecting spouse the unconditional right to become a party to the proceeding to determine whether to grant relief.

The IRS determined that the 1999 joint return of Robert and Suzanne Fain reflected a deficiency of approximately $15,000. Following the couple’s separation, Mrs. Fain asked the IRS for innocent spouse relief in 2006. When her request was denied, she filed a petition with the Tax Court. The IRS was required to notify Mr. Fain within 60 days of the filing of the petition of his right to intervene. There was only one problem: He had died in 2002.

Although the Tax Court has previously held that a deceased spouse’s estate may request innocent spouse relief, it had never addressed the posthumous rights of a nonelecting spouse. The court noted that the decedent’s heirs and beneficiaries could be affected by the outcome of innocent spouse proceedings, in that if such status was granted, the estate would be the only remaining source of payment. Accordingly, the court held that such interests should be protected by granting the estate a right to intervene. Further, where the nonelecting spouse is deceased, both the requesting spouse and the IRS must provide the court with the names and addresses of the decedent’s heirs at law, so that the court may give notice of the right to intervene.

Fain v. Commissioner , 129 TC no. 11

Prepared by Laura Lee Mannino , CPA, LL.M., assistant professor of accounting and taxation, St. John’s University, Jamaica, N.Y.