In Uncategorized on 04/18/2017 at 21:13

Once again I strike up Prof. Tom Lehrer’s 1945 classic, as the Harvard Federal Tax clinicians fight fiercely to overturn Reg. 1.6015-4, which bans refunds to innocent spouses in Section 6015(c) apportioned-guilt cases. They’re in as amicus curiae.

Of course, they’re in Tax Court, and challenges of this kind are non-starters, but they do get a footnote at the bottom of the last page of Judge Vasquez’s opinion.

The case is Brenda Taft, 2017 T. C. 66, filed 4/18/17.

The scrimmage here is about $1570 that was held back from Brenda’s refund. IRS gave Brenda Section 6015(c) innocent spousery, based on the thoroughpaced skullduggery of her nogoodnik ex-husband, who wasted his retirement money on his girlfriend. Brenda got wind of this and ditched him.

He’d e-filed a phony return to disguise the plunder, but didn’t disclose some dividends, for which IRS hit him with a deficiency. The phony return with a forged e-signature for Brenda was a MFJ, so IRS hit Brenda.

Brenda got Section 6015(c), but the aforesaid regulation bars refunds.

Judge Vasquez Judge ‘splains: “Section 6015 provides three avenues for relief from that liability (often referred to as innocent spouse relief) to a taxpayer who has filed a joint return: (1) section 6015(b) allows relief for understatements of tax attributable to certain erroneous items on a return; (2) section 6015(c) provides relief for a portion of an understatement of tax to taxpayers who are separated or divorced; and (3) section 6015(f) more broadly confers on the Commissioner discretion to grant equitable relief to taxpayers who otherwise do not qualify under section 6015(b) or (c). See also sec. 6015(e).” 2017 T. C. Memo. 66, at p. 4.

Brenda wants the refund she can get under 6015(b), not the 6015(c) sorry-‘bout-that no refund.

IRS says Brenda had reason to know of the understatement of tax on the forged return and it wouldn’t be inequitable to hold her for her share, so Section 6015(b) doesn’t get it.

Judge Vasquez cruises through the 6015(b) factors. Brenda was a nurse, had no tax background, and kept a separate checkbook from her spouse (who told her nothing). He certainly didn’t lavish anything on Brenda (he gave it all to his girlfriend), claimed “he took care of their taxes,” and the divorce court found that her ex was a total swine.

So Brenda had no reason to know that her ex plundered his retirement money, and it would not be inequitable to give her back the $1570.

Now as to the Harvard Clinicians: “Petitioner and amicus alternatively argue that she is entitled to relief under sec. 6015(f) and that the Court should invalidate sec. 1.6015-4(b), Income Tax Regs., which bars refunds under certain circumstances. Because we determine that petitioner is entitled to relief under sec. 6015(b), we need not address this alternative argument.” 2017 T. C. 66, at p. 10, Footnote 4.

Apparently Judge Vasquez was going to consider invalidating Reg. 1.6015-4, but thought better of it. He might have a slight jurisdictional problem if he did.


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