Taxpayer’s blog posts held admissible in innocent-spouse case

The Tax Court held that blogs posted to the internet by a taxpayer before she filed a petition with the court seeking relief from joint-and-several liability under Sec. 6015(f) but discovered by the IRS after the petition’s filing were “newly discovered” and admissible as evidence under Sec. 6015(e)(7)(b). This is the first time the court has interpreted the term “newly discovered” in the context of this statute.

Facts: Sydney Ann Chaney Thomas and her husband filed joint federal income tax returns in 2012, 2013, and 2014. However, they did not pay the full amounts of tax due on those returns. Her husband died in 2016, and Thomas requested that the IRS grant her equitable innocent-spouse relief from the unpaid tax liabilities under Sec. 6015(f). The IRS denied that request in 2020, and in November 2020, Thomas petitioned the Tax Court to review the IRS’s determination.

During the trial, the IRS introduced personal blog posts written by Thomas between 2016 and 2022 as evidence of her assets, lifestyle, business, and relationship with her late husband. These blog posts were not part of the previous IRS administrative record. Thomas objected to the inclusion of these blog posts and filed a motion to strike them from evidence. She did not allege that they were irrelevant, only that they were not admissible in the Tax Court proceeding as “newly discovered.”

Issues: Sec. 6015(e)(7) was added in 2019 to establish the standard and scope of the Tax Court’s review of an IRS administrative determination of innocent-spouse relief. The court’s review is to be de novo, based upon “the administrative record established at the time of the determination, and any additional newly discovered or previously unavailable evidence” (emphasis added). As the blog posts were not part of the administrative record, the court had to examine whether they constituted “newly discovered or previously unavailable evidence.”

Thomas asserted that her personal blog posts predating the IRS’s administrative denial of relief did not qualify as “previously unavailable.” Regarding the “newly discovered” requirement, Thomas argued that a reasonable level of due diligence by the IRS during the administrative process would have uncovered the blog posts. As a result, the IRS’s lack of diligence in finding the blogs should not qualify the evidence as “newly discovered,” she contended. She relied on Rule 60(b)(2) of the Federal Rules of Civil Procedure, which establishes a standard for admitting newly discovered evidence to relieve a party from a final judgment, order, or proceeding by requiring a showing that the party seeking admission of the evidence could not have with reasonable diligence discovered it in time to move for a new trial.

The IRS asked the court to rely on the ordinary meaning of “newly discovered,” arguing that requiring such due diligence prior to court proceedings would be a waste of resources. The burden of proof is on the taxpayer during the administrative stage, the Service argued, so any evidence-gathering activities by the IRS at this point may be unnecessary. Furthermore, the IRS pointed out, it has little insight into whether evidence will be needed until the taxpayer petitions the court.

Holding: The Tax Court determined that in interpreting the term “newly discovered” it must look to the “ordinary, contemporary, common meaning” of a term when the law using it was enacted (citing Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 2356 (2019)). Applying that standard, the court determined that “newly discovered,” as of 2019, meant “recently obtained sight or knowledge of for the first time,” without any reasonable-diligence burden. Thomas’s motion to strike the blog posts from the record was denied.

As for Thomas’s argument regarding Rule 60(b)(2), the Tax Court found that it failed because that rule deals with motions for new trials, and an administrative proceeding under Sec. 6015(f) is not a trial. More importantly, the specific language of Rule 60(b)(2) requires a reasonable-diligence standard, which Sec. 6015(e)(7) does not. The latter is consistent with the de novo nature of the review.

The Tax Court noted that the rule it was adopting would apply to evidence that is newly discovered by both the requesting spouse and the IRS. However, a concurring opinion provided examples of how the court’s ruling regarding newly discovered or previously unavailable evidence could benefit the IRS while providing no such benefit to a taxpayer. As decided in this case, the IRS can introduce taxpayer-created social media posts found after the administrative proceedings have ended to help its case. The respective taxpayer, though, may not be able to introduce self-created social media posts to help his or her case, as the posts would be neither “newly discovered” nor “previously unavailable” to the taxpayer. Thus, Congress’s wording of Sec. 6015(e) (7) may hinder taxpayers challenging denials of innocent-spouse relief in a way it may not have intended, the concurring opinion suggested.

■ Thomas, 160 T.C. No. 4 (2023)

— Shannon Veyon Jemiolo, CPA, Ph.D., is an assistant professor of accounting, and Ian Redpath, J.D., LL.M., is a professor of accounting, both at Canisius College, Buffalo, N.Y. To comment on this column, contact Paul Bonner, the JofA’s tax editor.