No,  not a political diatribe, not here anyway; if you’re seeking one from me, look elsewhere. This is about a common conveyancing issue, and it comes out in an innocent spousery. STJ Diana L. (“Sidewalks of New York”) Leyden has this one, probably because she knows about NY sit-down title closings, even though this is most likely a CA escrow remote-control.

Trisha D. Anderson, T. C. Sum. Op. 2026-6, filed 7/22/26, wants Section 6015(c) innocent spousery from the $108K deficiency handed to her ex. He alone was on both mortgages on the marital residence, but both were in title. As part of their pre-divorce alignments, they sold same, and the RESPA (or TIL) showed mortgage payoffs with checks to the two (count ’em two) lenders. Trisha claims she never knew about lender 2.

IRS gave ex the SND when he didn’t produce proof that he had actually paid the interest.

Trisha says she’s flat broke, has no bank accounts and can’t work because of illness.

IRS denied Trisha’s innocent spouse request, saying she had actual knowledge of the. nonpayment of interest. STJ Di grants Trisha’s request.

“The evidence before the Court indicates\ that, as petitioner said, the mortgage interest claimed on the…[year at issue] tax return was in fact paid when the house was sold by petitioner and Mr. Anderson… as identified on the Seller’s Final Settlement Statement. In fact, contrary to respondent’s argument that petitioner had actual knowledge that the item giving rise to the deficiency was unpaid, on the basis of the record before the Court, the Court finds that petitioner had actual knowledge that the mortgage interest totaling $108,407.83 was paid to the two mortgage companies that held mortgages on the house held by The Anderson Family Trust.” T. C. Sum. Op. 2026-6, at p. 7. (Emphasis by the Court).

IRS has BoP on actual knowledge, and STJ Di says they haven’t met it, a wee understatement.

CA community property plays no part per Section 6015(c). Only ex had income and only he was personally on the mortgages. While Trisha took title subject to, and therefore could have paid interest, she had no money and couldn’t.

Taishoff says how come the lenders put mortgages on a CA property titled in husband and wife with a note executed by husband only? STJ Di says only that Trisha and ex acquired the property in 2003, and by 2016 the mortgages were there, T. C. Memo. 2026-6, at p. 3. Unless both mortgages were there pre-acquisition, somebody messed up.

More to the point, however, ex probably couldn’t find the settlement statement, showing interest was part of the mortgage payoff at closing, and paid out of purchase price from the purchaser. Though the interest was paid by purchaser as part of the purchase price, it was paid for benefit of seller as an obligation of seller. It’s as if the seller paid purchaser and the purchaser paid lenders. Payment by third party of an obligation of taxpayer is income to taxpayer, although that payment may in turn be deductible by taxpayer.

I’d already reported on Doc Krueger, when Judge Albert G. (“Scholar Al”) Lauber gave the bad news to David J. Matto and Krista M. Matto, T. C. Memo. 2026-60, filed 7/21/26. David J. is also a dentist (hereinafter “Doc Dave”). 

Doc Dave did pay the extra tax three (count ’em, three) years later, but got charged interest for the underpayment he corrected with his 1040-X. His Sub Ss paid wages during the COVID lockdown and qualified for the ERC, which he got three years later. But that means the deduction for the wages paid that qualified him for the ERC had to go, lest he should double-dip, hence the 1040-X for 2020.

Doc Dave’s bœuf is that, while he only got the benefit in 2023, he’s being charged interest for payments he made in good faith in 2020. Appeals denied his abatement of interest claim, so he petitions.

Judge Scholar Al is far too erudite and well-bred to reply “Bummer, dude, that’s how the cookie crumbles.”

You owe tax from when it is due. That the amount is later corrected does not mean the tax wasn’t due. “Petitioners’ Form 1040–X correctly reported an increased amount of tax due for tax year 2020. Underpayment interest began to accrue automatically on May 18, 2021, the day after the due date for their 2020 return. See § 6601(a); Notice 2021-21, 2021-15 I.R.B. 986. Applicable IRS guidance confirmed that point. See Notice 2021-49, 2021-34 I.R.B. 316; see also Notice 2021-20, 2021-11 I.R.B. 922. In their Response to the Motion, petitioners concede that they ‘were required under then-applicable guidance to amend their prior-year [i.e., their 2020] return’ and ‘that the interest accrued as a matter of mathematical operation under I.R.C. §§ 6151(a) and 6601(a).’ An IRS officer does not abuse his discretion when he follows published IRS guidance.” T. C. Memo. 2025-60, at p. 6.

And IRS made neither ministerial (nondiscretionary) or managerial (personnel assignment) miscues. So Section 6404(e) precludes relief.

I gotta give it to Charles Dickens: he gets it right yet again. David Fred Krueger, Docket No. 26107-21L, filed 7/22/26 certainly tells a tale of hard times. Btw, that’s Doctor Krueger, the dentist. 

Doc Krueger bought his dental practice in 2007. He says he was walloped by The Black ’08, such that he couldn’t pay his taxes for seven (count ’em, seven) years thereafter, although he did self-report. See Order at p. 1, footnote 2. Two unpaid years remain at issue, plus reasonable cause for late payment add-ons.

Taking unpaid years first, the CA request was supported by “an unsigned, undated, and illegible Form 433–A with insufficient supporting documentation.” Order, at p. 3. Judge Ashford kicks that to the curb, Order, at p. 10, although Doc Krueger can try again administratively.

But as to the Section 6651(a)(2) add-ons, there is the question whether de novo or abuse is the standard of review. For whatever reason, I didn’t blog the cases Judge Ashford cites, Order, at p. 8, so get them for your memo of law files. Aliquando bonus dormitat Homerus. Spoiler alert: De novo wins, but it doesn’t help Doc Krueger.

“SO L rejected petitioner’s request for abatement of the section 6651(a)(2) additions to tax with respect to the years at issue on the grounds that petitioner’s needing to use all available funds for five consecutive years (i.e., from 2011 to 2015) to try to save his failing dental practice did ‘not me[e]t the criteria for reasonable cause abatement.’ Her conclusion was well founded. Petitioner provided no information to SO L (as well as to SO K) that satisfied the reasonable cause standards for any of the additions to tax. Instead, he made only vague or conclusory assertions that the local economy did not recover from the ‘catastrophic’ 2008 financial crisis by 2015, resulting in him experiencing a ‘sharp decline in business revenue’ and ‘significant financial hardship’ from which he could not recover. He also merely alluded to making ‘reasonable efforts to conserve funds to pay taxes,’ but also acknowledged that ‘[he] was unable to do so.’ Petitioner carries a heavy burden of proving that his failure to pay taxes for the years at issue was due to reasonable cause and not due to willful neglect. Petitioner’s assertions and allusions regarding financial difficulties were manifestly insufficient for SO L to gauge petitioner’s financial situation and petitioner’s exercise of ordinary business care and prudence with respect to his obligations to pay taxes for the years at issue. Indeed, petitioner has not explained how his failure to satisfy (or even attempt to satisfy) his tax payment obligations for the years at issue were the direct result of economic conditions in 2008, conditions that were roughly five and seven years before the years at issue. Accordingly, we agree with SO L that it was ‘unreasonable’ for petitioner to think that he exercised ordinary business care and prudence, thus establishing reasonable cause for his failure to pay the taxes for the years at issue and justifying abatement of the section 6651(a)(2) additions to tax for the years at issue.” Order, at p.9. (Citations, names, and footnote omitted but see infra, as the expensive lawyers say).

“We note that one of petitioner’s own statements to SO L (as well as to SO K) was that the dental practice showed net profits during the years at issue.” Order, at p. 9, footnote 8.