When innocent spousery is first raised as an affirmative defense in a deficiency case petition, OCC need not follow the Cincinnati (that’s CCISO, not George Washington’s Officers’ Club).

Here’s Judge Holmes. “Michelle DelPonte separated from her ex-husband, William Goddard, in 2000. She is still, more than twenty years later, trying to untangle his affairs from her own. What concerns us is her effort to be relieved of her liability on the joint tax returns she filed with Goddard while they were married. The part of the IRS bureaucracy that usually handles these sorts of requests thinks she’s entitled to relief. The IRS’s lawyer disagrees. We must decide who speaks for the IRS.” 158 T. C. 7, at p. 2.

Goddard had stalled IRS while litigating deficiencies from his dodgeflogging operations with assertions of innocent spousery for Michelle, without telling her. Michelle got wind of this, got her own attorney, and alleged innocent spousery to defend against deficiencies as against her. OCC asked CCISO to determine Michelle’s claim. CCISO found for Michelle, but OCC wasn’t happy and wanted more discovery.

Michelle moves for entry of decision that she is an innocent spouse.

Judge Holmes goes exhaustively (and exhaustingly) through the history of innocent spousery. While innocent spousery in a CDP or a stand-alone is well-trodden territory, as a defense to a deficiency it’s not so clear.

While the IRM and CCMs all say that OCC attorneys must refer to CCISO, they still are charged with determining IRS’ litigating position. Thus, even when CCISO determines innocent spousery favorably, OCC counsel isn’t bound while litigating a deficiency.

And pore l’il ol’ Tax Court can’t make IRS play fair.

“Congress gave us exclusive jurisdiction to redetermine the correct amount of a taxpayer’s deficiency for a given tax year once the taxpayer receives a valid notice of deficiency and timely files a petition with us. Congress also gave the Chief Counsel the authority to litigate cases before us. § 7803(b)(2)(D). We cannot undo this statutory scheme by depriving either ourselves or the Chief Counsel of the powers it has given to us in the name of fairness.” 158 T. C. 7, at pp. 17-18. (Citation omitted).

Taishoff says this is definitely unfair. Unless OCC has a smoking gun that CCISO could never have discovered with reasonable diligence, and can make Tax Court smell the smoke, enough is enough. Let Michelle off the hook after twenty (count ’em, twenty) years.

Edited to add, 5/6/22: The more I think about this decision, the less I like it. Michelle is caught, after twenty years, in an interdepartmental turf war between CCISO and OCC. Her trusty attorneys rightly moved for entry of decision. Denial is grounds for appeal to 9 Cir, even on an interlocutory basis, as entry of decision would conclude the case. Judge Holmes rightly recognized that the motion is equivalent to a motion for partial summary J (158 T. C. 7, at p. 5). Her trusty attorneys should appeal.

OCC’s “we need more discovery” is no response to a motion for summary J; either there are facts, or there aren’t. Michelle’s trusty attorneys and OCC have done the epistolary joust for years, 158 T. C. 7, at p. 4-5, and gone nowhere. If there’s newly-discovered evidence, then remand to CCISO to review. Or is OCC deciding that it is the new CCISO, and the Cincinnati can have a farewell dinner at Fraunces’ Tavern down the block from my office, disband, and go home?