Closing agreement prevented innocent spouse relief
Article Abstract:
The Court of Appeals for the Ninth Circuit ruled that a taxpayer could not use the innocent spouse defense to discharge income taxes in a bankruptcy procedure that were covered by a closing agreement. Initially, the bankruptcy court asserted that the tax liens could not be discharged since the taxpayer engaged in a prior closing agreement co-executed with her ex-husband in a settlement proceeding and did not retain the right to use the innocent spouse defense. Then, the district court sided with the decision and found that closing agreement implied that the husband and wife will be jointly and severally liable for any tax corrections due to a closing agreement signed by both the husband and wife for a tax year covered by a joint return. Finally, the Ninth Circuit affirmed the earlier decisions by relying on Sec 7121, which allows the IRS to enter into closing agreements to ensure finality in a tax liability.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1998
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Partial tax relief for partially innocent spouse
Article Abstract:
It is usually quite difficult for taxpayers to obtain an innocent spouse status which allows tax relief. However, a woman in the 'Wiksell' case was able to achieve such status, thereby enabling her to avail of partial relief even though she knew that an understatement of income on a joint return was being made by her husband. She was able to prove that she did not have ample knowledge of her husband's business dealings. The Ninth Circuit court held that Sec. 6013(e) allows apportionment of innocent spouse relief and sent the case back to the Tax Court to ascertain what fraction of the deficiency qualified for the relief. The court explained that although Sec. 6013(e) does not contain any provision on the apportionment of tax liability for which innocent spouse status is granted, the Code does not forbid this.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1996
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Court holds that innocence need not mean total ignorance
Article Abstract:
The Tax Court's decisions on the 'Bartlett' and 'Resser' cases establish that a taxpayer need not be totally ignorant of the finances of the spouse or former spouse to qualify for a taxpayer innocent spouse relief. In 'Bartlett,' the court considered the spouse innocent despite her knowledge of her ex-husband's tax shelter investment due to her limited education, non-involvement in the management of the family finances, and her ex-husband's failure to inform her of the details of the investment. In 'Resser,' the Seventh Circuit recognized that the taxpayer had no sufficient knowledge of her husband's bogus options-trading losses that resulted in considerable understatement, and therefore qualified for innocent spouse relief.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1997
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