In Uncategorized on 09/04/2019 at 19:29

Melinda Jean Welwood, 2019 T.C. 113, filed 9/4/19, claims she was abused by her late husband, Mike, flogger of the low-income housing tax credits that gave a quick write-off but heavy recapture in later years.

The famous 1986 Internal Revenue Code put paid to this, among many other tax savers (to be charitable). So as part of a divorce that never happened, Mike conveyed half-interests in his write-off partnerships to Mel. What did happen, of course, was that the old write-offs came back as phantom income.

Mel and her trusty CPA filed, showing the income, but paying no tax, because Mel commendably spent the money taking care of Mike, who, after four (count ‘em, four) strokes, was massively disabled.

Mel claimed Mike abused her, but also stated on her CDP that Mike didn’t have “…the cognitive ability to peel an orange. The RS [Requesting Spouse] didn’t provide any dates of abuse or explain how the abuse is related to the tax matter.” Order, at p. 9.

And she stayed married to him, lived for a time in the same house, and paid his bills instead of IRS.

Judge Cohen: “We next examine whether the requesting spouse knew or had reason to know that there was an understatement or deficiency on the joint income tax return, or knew or had reason to know that the nonrequesting spouse would not or could not pay a reported but unpaid tax liability. We believe the evidence compels the conclusion that petitioner knew that M. [Mike] Welwood would not and could not pay the reported liabilities. Petitioner contends that her knowledge was obviated by a pattern of abuse throughout the marriage, but we are unpersuaded that any perceived abuse was material to the issues before us. She testified that she was fearful because her husband had guns, but the only incident she specifically described occurred…while he was in a nursing and rehabilitative care facility. During the incident M. Welwood stated that he wanted a gun in order to commit suicide. There is no evidence that he threatened petitioner with a gun or that he had access to a gun at the time.” 2019 T. C. Memo. 113, at pp. 21-22.

It doesn’t get better for Mel.

Mel knew about the tax deals’ back-end hits from her trusty CPA. She took them and the money they threw off, and paid Mike’s bills and hers. Yes, she had major health problems. But.

“Certain of petitioner’s health problems have been with her from birth. With respect to petitioner’s age-related health issues, they have not prevented her gainful employment and are not unusual. They may be a consideration in future collection efforts by the IRS. We agree with respondent that as of now this factor is neutral.

“By our estimation, petitioner’s knowledge weighs heavily against relief and all of the other relevant factors are neutral. Although petitioner’s situation is difficult and unfortunate, the circumstances are not compelling and do not justify relief from the joint liabilities. She offered no reasonable alternatives to the proposed collection actions and has suggested no abuse of discretion with respect to that determination. She chose only to pursue total relief under section 6015(f). We are not persuaded that she is entitled to such relief.” 2019 T. C. Memo. 113, at pp. 23-24.




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