Post Bankruptcy Collection Action

Posted on by katemley

11 U.S.C. 522(c)(2)(B)


The United States Tax Court in Mongogna v. Comm’r of Internal Revenue, Docket No. 18651-23L, filed August 18, 2025, sustained a levy decision from a Collection Due Process hearing after it determined that a Settlement Officer had not abused her discretion. This case presents a good explanation of the effect of a bankruptcy discharge on a pre-petition tax lien filing. Taxpayers are a married couple that owed income taxes for many years. They filed a chapter 7 bankruptcy after the filing of a Notice of Federal Tax lien affecting several tax periods.  They owed total taxes of $288,476 at the time of filing their bankruptcy. A discharge was ultimately issued. Post-bankruptcy, the IRS sent the taxpayers a notice of intent to levy with a right for an Appeal, which the taxpayers took advantage of. The taxpayers were advised that in order to proceed with the Appeals hearing, they would have to provide financials and disclose if they had any exempt or abandoned property from the bankruptcy. Their lawyer argued that it was not their duty to provide this information to the IRS. He further argued that because much of the debt was discharged, it was not necessary to provide financials as they wanted a streamlined payment agreement. That is available when a taxpayer owes less than $50,000. The Appeals officer disagreed and indicated that it was necessary to address the exempt and abandoned property so that the IRS insolvency unit could determine what was discharged and whether or not the pre-petition lien filing attached to the exempt and abandoned assets. The Court agreed with the Appeals Officer that failure to disclose this information prohibited a collection alternative, such as an installment agreement, from being established. It is worth repeating the rule relating to the effect of the lien in this matter. A chapter 7 bankruptcy may discharge a person from personal liability for the federal taxes owed in some cases, however, it does not extinguish a pre-bankruptcy petition federal tax lien. See 11 U.S.C. 522(c)(2)(B). Therefore, collections can be enforced against taxpayers exempt or abandoned property, post-bankruptcy.

Innocent Spouse Relief

Posted on by katemley

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. 

Offer in Compromise—Deemed Acceptance

Posted on by katemley

IRC 7122(f) 


Bauche v. Comm’r, filed May 20, 2025 at T.C. Memo 2025-48 allows the Court to explore the possibility that the IRS has waited too long to review an Offer in Compromise, and thus under the statute, it is deemed accepted.  The rule in IRC 7122(f) states in part: “[a]ny Offer in Compromise submitted under this section shall be deemed to be accepted by the Secretary if such offer is not rejected by the Secretary before the date which is 24 months after the date of submission of such offer.”  The taxpayer landed in a Collection Due Process hearing after issuance of a lien notice.  During that proceeding, it was determined that filing an Offer in Compromise made sense.  The taxpayer argued that the IRS did not reject its Offer in Compromise until the Settlement Officer issued its Notice of Determination, which was more than 24 months later.  The IRS argued that the Offer had been rejected when Appeals mailed the taxpayer a letter saying the IRS was rejecting the Offer, in spite of the fact that a final Notice of Determination associated with the conclusion of the Collection Due Process hearing had not been sent out.  The Court indicated that if it agreed with the taxpayer, it would have created a dilemma for Appeals because they may not have resolved all issues associated with the Collection Due Process hearing, but could be forced to issue a Notice of Determination to meet the 24 month deadline.  The Court felt that the letter issued by the IRS through Appeals regarding its rejection of the Offer, even though the Appeals hearing was not fully resolved, clearly indicated to the taxpayer that the Offer was rejected.  This illustrates the premise that part of the Collection Due Process hearing process is to entertain collection alternatives, but that is not the entire purpose. 

Innocent Spouse Relief: Relief while married

Posted on by katemley

Taxpayer obtains relief while still married

In Hudson v. Comm’r T.C. Summary Opinion 2017-7, filed February 8, 2017, the Tax Court granted equitable relief from joint and several liability under section 6015(f).  It is a rare case that the IRS grants relief to a taxpayer that requests innocent spouse relief, unless that individual is legally separated or divorced from the jointly liable taxpayer. The taxpayer and her husband remained legally married, but were essentially estranged.  Petitioner remained in the marriage because she “regards the vow of marriage as sacrosanct and does not believe in divorce.” The liability reported on the face of the return was largely from the early withdrawal penalty associated with Petitioner’s husband taking a distribution from his retirement account to finance the purchase of a piece of residential real estate – in his name alone. Though petitioner resided at this residence, the Tax Court did not believe she enjoyed a lavish lifestyle.  Petitioner held a bachelors degree and, while she was out of the workplace caring for their children during the year at issue, she later became employed in her field. At the time of filing the Petition in the Tax Court, she was unemployed and struggled with reasonable living expenses. The Court could not provide “streamlined” relief because the Petitioner remained married.  That triggered a facts and circumstances analysis where economic hardship and lack of significant benefit factored heavily into the Court’s grant of liability relief.