Tax Court Grants Individual Innocent Spouse Relief

In Andrea Rae Demeter et al. v. Commissioner, T.C. Memo No. 2014-238, the Tax Court held that an individual is entitled to relief from a joint tax liability with her former husband, finding that several factors weigh in favor of granting relief, including the fact that she would suffer economic hardship is not granted relief and that her former husband is legally obligated to pay under their divorce agreement.

In general, a spouse who files a joint Federal income tax return is jointly and severally liable for the entire tax liability. Sec. 6013(d)(3). However, a spouse may be relieved of joint and several liability under section 6015(f) if: (1) taking into account all the facts and circumstances, it is inequitable to hold a taxpayer liable for any unpaid tax; and (2) relief is not available to the spouse under subsection (b) or (c). Sec. 6015(f)(1) and (2).

Subsections (b) and (c) of section 6015 apply only in the case of “an understatement of tax” or “any deficiency” in tax, respectively, and do not apply in the case of underpayments of tax reported on joint tax returns. Sec. 6015(b)(1)(B), (c)(1); Hopkins v. Commissioner, 121 T.C. 73, 88 (2003); see also Block v. Commissioner, 120 T.C. 62, 66 (2003). Because petitioner seeks relief from an underpayment of tax, she is not entitled to relief under section 6015(b) or (c) and may look only to subsection (f) for relief from joint and several liability.


Posted by Theodore H. Waggner, Esq., Associate Editor, Wealth Strategies Journal

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