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Innocent spouse tax relief and tax problem resolution

Tax Court properly denied separate filer equitable innocent spouse relief Christensen, (CA 9 4/21/2008) 101 AFTR 2d ¶ 2008-705

Mike Habib, EA


The Ninth Circuit has affirmed the Tax Court’s dismissal of a taxpayer’s claim for equitable innocent spouse relief under Code Sec. 6015(f). The Ninth Circuit agreed with the Tax Court’s finding that relief under Code Sec. 6015(f) is available only to spouses who file a joint return. In this case, the taxpayer filed separately and thus was not entitled to innocent spouse relief.

Background. Each spouse is jointly and severally liable for the tax, interest, and penalties (other than the civil fraud penalty) arising from a joint return. Relief from joint and several liability is available: (1) under the regular innocent spouse rules; (2) in the case of spouses who are no longer married, are legally separated, or live apart, under the separate liability election rules; and (3) where relief is not available under (1) or (2), under IRS’s power to grant equitable relief. (Code Sec. 6015)

On Sept. 14, 2004, Christensen filed a request with IRS for relief from tax liabilities assessed against him for tax years ’89 through ’92. He did not file jointly for those years but said that the tax deficiencies resulted from improper income reporting within his wife’s check-cashing business. Christensen argued that the deficiencies should not be attributed to him, given his lack of involvement in the business. He sought relief from the liabilities as an innocent spouse under Code Sec. 6015 , or, alternatively, for relief under community property laws.

IRS denied his request for innocent spouse relief and for relief under Code Sec. 66, which relieves community property liability under some circumstances. Christensen petitioned for review before the Tax Court, which granted summary judgment for IRS on the Code Sec. 6015 claim after finding that such relief is available only to joint filers. The Tax Court dismissed Christensen’s claims under Code Sec. 66(c) and the predecessor innocent spouse provision of former Code Sec. 6013(e) for lack of jurisdiction. Christensen filed a timely appeal seeking review of his request for equitable relief under Code Sec. 6015(f) for tax years ’89 and ’90.

Jurisdictional question. While IRS didn’t question the Tax Court’s jurisdiction, the Ninth Circuit said it had to consider the issue, which it felt was murky in this case. The Tax Relief and Health Care Act of 2006 amended Code Sec. 6015 to provide that the Tax Court may review claims for equitable innocent spouse relief and to suspend the running of the period of limitations while such claims are pending. This change was effective for requests for equitable relief with respect to liability for taxes that were unpaid or after the enactment date (Dec. 20, 2006).

The Ninth Circuit noted that, under the change, the Tax Court would have had express jurisdiction over Christensen’s Code Sec. 6015(f) claim as of Dec. 20, 2006. However, the Tax Court entered its order on Jan. 10, 2006. The Appeals Court said that where a new statutory provision confers jurisdiction while an action is pending, it normally applies the new rule regardless of whether the court below had jurisdiction when the suit was filed or judgment was entered. Accordingly, it concluded that the Tax Court had jurisdiction to review the Code Sec. 6015(f) claim.

Joint return required for relief. Christensen argued that Code Sec. 6015(f) is available to spouses who face joint liability under community property laws but do not file a joint return. The Ninth Circuit agreed that, unlike Code Sec. 6015(b) and Code Sec. 6015(c), the language of Code Sec. 6015(f) does not explicitly require the filing of a joint tax return as a procedural requirement for relief. However, it stressed that the language in Code Sec. 6015(e) and Code Sec. 6015(h) implies a joint return requirement for Code Sec. 6015(f). For example, Code Sec. 6015(e) directs the Tax Court to “establish rules which provide the individual filing a joint return but not making the election under subsection (b) or (c) or the request for equitable relief under subsection (f) with adequate notice and an opportunity to become a party…” (Code Sec. 6015(e)(4)) Similarly, Code Sec. 6015(h) refers to the non-petitioning spouse in a Code Sec. 6015(f) claim, to whom notice must be sent, as “the other individual filing the joint return.” The Ninth Circuit said that this language indicates that Congress anticipated a joint return where a spouse petitions for relief under Code Sec. 6015(f). Accordingly, the Appeals Court sustained the Tax Court’s dismissal of the case.

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