IRC 6015

The Tax Court in Keri A. deGuzman and Brian deGuzman v. Comm’r of Internal Revenue, at Docket No. 13230-20, issued an opinion after trial on May 2, 2023 finding that it was appropriate to grant Innocent Spouse Relief under IRC section 6015 (c). In this case, Brian deGuzman was a cardiothoracic surgeon. He met his wife, Keri, at a hospital where she was a nurse.  They married in 2004.  They ultimately adopted four children and Ms. deGuzman ceased working.   Dr. DeGuzman was not only a surgeon, but also the co-founder of two medical device related companies and the chief medical officer of one of the companies.  The DeGuzman’s lived a “lavish,” lifestyle per the Court. Ms. DeGuzman enjoyed as much of the lavish lifestyle as her husband. During the 2013 to 2018 time period, the taxpayers either failed to timely file their income tax returns, or failed to properly pay their taxes.  They ultimately owed hundreds of thousands of dollars to the IRS. Interestingly, it was also Ms. DeGuzman who regularly communicated with the CPA regarding preparation of the family tax returns…including at least some information about Dr. DeGuzman’s businesses. She also participated in meetings with the CPA about the tax issues.  While the 2016 and 2017 returns were filed late, 2018 was timely filed.  All were examined by the IRS and ultimately adjusted.  Ms. DeGuzman requested relief from the exam assessments under the Innocent Spouse statutory sections and the IRS allowed it. Ultimately, Dr. DeGuzman disagreed and the matter ended up before the Tax Court.   All of the above is mentioned because it normally negates the success of a taxpayer seeking innocent spouse relief.  However, in this case, the IRS had granted the relief and the Appeals division sustained it.  In this case, the spouse has brought the matter before the Court.  The statute indicates that it is the requirement of the government to prove that the requesting spouse (Ms. DeGuzman) had actual knowledge of the items that gave rise to the deficiency.  Remember, it wasn’t the IRS arguing that Ms. DeGuzman should be held liable here, it was her husband.  As such, nothing before the Court reflected the IRS arguing that Ms. DeGuzman had actual knowledge of these items giving rise to the deficiency. Because of that issue, the Court could not conclude that Ms. DeGuzman had actual knowledge of the understatement items and therefore the relief granted under the Innocent Spouse provisions of Section 6015(c) stood.  Regardless of the reasons, this case is a bit of an outlier when it comes to relief for someone that seemingly benefited so much personally from non-payment of tax deficiencies.