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Wednesday, December 01, 2010


Each spouse is jointly and severally liable for the tax, interest, and penalties (other than civil fraud penalty) arising from a joint return. However, the Internal Revenue Code provides various routes for relief for an “innocent spouse.”

One of those routes is relief under Code §6015(f). A spouse can obtain equitable relief from joint liability if “taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency.” The procedures for obtaining Code §6015(f) relief are provided for in Rev.Proc. 2003-61.

A recent Tax Court case illustrates the application of the rules in that Revenue Procedure, and further demonstrate the Tax Court favorably granting relief to a spouse under those procedures even though the spouse knew at the time she signed and filed the tax return that there was a good chance the taxes indicated as due on the return would not be paid.

Under Rev.Proc. 2003-61, a prerequisite to equitable relief is that seven threshold conditions described in Section 4.01 must be met. If they are met, the the IRS will ordinarily grant relief to a requesting spouse if three safe harbor conditions in Section 4.02 are met.

In the recent case, a former wife passed the seven threshold conditions of Section 4.01. However, due to her having filed the return with knowledge that the taxes would likely not be paid, she did not meet the three safe harbor conditions of Section 4.02.

Nonetheless, all is not yet lost for a spouse that fails the three safe harbor conditions. In that circumstances, the spouse has one more chance – the IRS can still grant equitable relief after applying a balancing test that weighs various factors in Section 4.03 of the Revenue Procedure. Luckily for the spouse in this case, the Tax Court found enough factors in the wife’s favor that it found the spouse eligible for equitable innocent spouse relief.

I have put together a MindMap that summarizes the various routes to innocent spouse relief, including the various conditions, safe harbors, and factors applied under Rev.Proc. 2003-61, for anyone that wants to dig down into the details of these provisions. Click HERE for an Adobe Acrobat version, and HERE for a flash version. In this case, the wife could not use the relief mechanisms of Code §6015(b) or (c) because the tax due had been reported by the taxpayer on a return.

Gail P. Drayer v. Comm., TC Memo 2010-257

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