IRC 6015(b)

IRC 6015

The Tax Court in Vanover v. Comm’r filed April 22, 2025 at T.C. Memo 2025-37 held that the requesting spouse should be granted partial relief under Section 6015(c) with respect to an understatement of the non-requesting spouse, but be denied relief under section 6015(b)(c) and (f) for all other items. Seems like all of the Innocent Spouse cases are lengthy, and this one is no different at 16 pages plus 2 pages of footnotes. Most times this is due to the lengthy analysis of factors for equitable relief under 6015(f). This case is no different in format to others in that regard. What is of interest and highlighted here is the analysis under 6015(b) and (c). This case is fact heavy, from a nasty divorce that included a physical altercation, to financial mismanagement on behalf of all taxpayers, the Court did a good job of setting the scene. What’s key to know about 6015(b) and 6015(c) is that they both require understatements of income. Whereas 6015(f) can be used if there is an underpayment of tax. Under 6015(b), if an additional assessment arises, relief from joint liability can be had if the item is attributable to the other spouse. The requesting spouse must establish that when they signed the return, they did not know and had no reason to know that there was a possible understatement. This is the “traditional,” original form of innocent spouse relief. Under 6015(c), a requesting spouse shall be relieved from liability for deficiencies allocable to the nonrequesting spouse. In other words, they separate the liability. Under this provision, in order to obtain relief, you must be divorced, legally separated, or living apart for at least 12 months. The case carefully sorts through all factors of each statute, ultimately denying most relief for the requesting spouse. Regardless, it is much more common to see equitable relief cases under 6015(f), so this review is rather helpful.

This newsletter has traditionally reviewed Innocent Spouse relief under the equitable provisions of IRC 6015(f), as that is the most common basis for relief. The case of Kraszewska v. Comm’r, filed February 28, 2024 at TC Memo 2024-026 provides an opportunity to review a Tax Court case where the Court granted relief under IRC 6015(b). In order to qualify for relief under this provision, it is necessary to meet all of the following provisions: a joint return has been filed; establishes that in signing the return he or she did not know, and had no reason to know, that there was such an understatement; it is inequitable to hold the other individual liable for the deficiency of tax attributable to such understatement; and the election is made within 2 years of collection activity beginning. The fundamental difference of 6015(b) versus 6015(f) is that there is an understatement of tax on the return, as opposed to simply an underpayment. In the instant case, the IRS issued a notice of deficiency for the taxpayers 2017 Form 1040 for a tax amount of $6,931. In other words, no balance was due on filing the return, rather, the IRS made adjustments and created a balance due. The Petitioner, who ultimately succeeds in this matter, was gainfully employed in her home country, prior to joining and marrying the Respondent in the United States. At that point, she ceased working. The taxpayers maintained separate bank accounts and the Respondent was very secretive about his finances. Due to lack of income and the secretive nature of the finances, Respondent controlled the financial aspects of their lives together. For the year in question, Petitioner had become employed, but turned over her income information to Respondent for tax return preparation as he told her she would not be familiar with the American tax system. Once the return was completed, Respondent only showed Petitioner the signature page of the return to file electronically. Though the case does not explain what adjustments were made by the IRS, the return did reflect itemized deductions that were almost half of the reported income and included large sums as unreimbursed employee expenses – a heavily examined area of late. The Court applied the facts to the law and determined that the Petitioner met all factors for relief and as such granted her relief from the deficiency. Again, a rather rare opportunity to review a case based on this type of Innocent Spouse Relief.