IRC 6015 (c) 

The United States Tax Court in Smith (Petitioner) and Hodge (Intervenor) v. Comm’r of Internal Revenue Service, Docket No. 372-23S, filed June 12, 2025, agreed with the Petitioner and the IRS in a rare case of review associated with a non-requesting spouse’s objection to provision of Innocent Spouse relief. The relevant tax period is 2017. However, the return was filed in July 2021. The return was prepared by Petitioner, wife. The couple legally separated in October 2021. Petitioner had W-2 income. Intervenor husband had W-2 income, 1099 income and cancelled debt income. Neither of the last two items were included on the return, so the IRS later issued a notice adjusting the liability. It was after this that Petitioner filed for Innocent Spouse relief under IRC 6015(c). Under this type of relief, the requesting party can have the liability limited to their income only. This particular provision states that relief is not available if the requesting spouse “had actual knowledge, at the time such individual signed the return, of any item giving rise to a deficiency (or portion thereof) which is not allocable to such individual…” In this case, the IRS agreed that requesting spouse should receive relief. However, the Intervenor (husband), submitted a response indicating that Petitioner must have been aware of the unreported income because she prepared the return and had access to his bank account, so she could not have been “completely oblivious,” as he stated it. The Court deemed his testimony to be self-serving and unverified. During the relevant period, the parties lived apart. The 1099 for self-employment and cancelled debt were addressed to the husband, Intervenor. The 1099 income was deposited into his sole account. Furthermore, the Court pointed out that throughout their marriage they always maintained separate bank accounts. Relief was granted to Petitioner because of the inability to meet the burden of the statute.