Procedure—Innocent Spouse Relief Granted

News from RWHSG

Posted by Kim Chen on May 18th, 2017

Before their divorce, the taxpayer and her husband filed a joint return with two Schedule C’s (Profit or Loss from Business): one reporting a net profit of $95,686 for the taxpayer’s realtor income, and one reporting a net loss of $133,277 for her husband’s cattle ranching activity, in which the taxpayer was never involved. The IRS determined a deficiency of $30,467, most of which was attributable to disallowed deductions for the cattle ranching activity. The taxpayer requested relief from joint and several liability under IRC Sec. 6015(b) and (c) for the deficiency related to the cattle ranching activity. Although the Tax Court didn’t grant relief under IRC Sec. 6015(b) because the taxpayer acknowledged having reviewed the return before consenting to file it, relief was granted under IRC Sec. 6015(c) because the IRS failed to show that the taxpayer had actual knowledge of the erroneous deductions. Windy W. Harris , TC Summ. Op. 2017-21 (Tax Ct.).