Posted on 02/01/2012
The Innocent Spouse case of the month is Wickman v. Commissioner, T.C. Summary Opinion 2012-8 (January 25, 2012). This case was heard under the Small tax case procedures, elected by the petitioner under Section 7463, and may not be cited as precedent for any other case. Nonetheless, it is one of those cases that you read and wonder, what was IRS thinking? It also is case that illustrates how the right of a spouse to intervene under Section 6015(e) (4) impacts Tax Court review of innocent spouse denials.
Why did initially deny Sherry Wickman’s request for equitable relief under Section 6015(f)? Let’s look at the facts as stipulated and found by the court:
What was IRS thinking? The decision does not state why IRS denied the request for equitable relief. After the petition was filed, however, IRS District Counsel undoubtedly realized the lack of merits for its denial, and a stipulation was entered that Petitioner was entitled to equitable relief from joint and several liability on the 2005 return as well as to refund of amounts she’d paid through voluntary payments and offsets on the tax liability for 2005.
Absent, Kevin’s intervention under Rule 325(b), the case would have been over. But, Kevin, objected to Sherry being released from joint and several liability. His argument was that she better able to pay the liability than he. The court finding that argument irrelevant, reviewed the IRS guidelines under then governing Rev. Proc. 2003-61, finding further that Sherry met all of the 7 threshold conditions in Section 4.01 of the Rev. Proc. and the 3 conditions under Section 4.02 under which the Rev. Proc. states IRS will ordinarily grant equitable relief (divorced, had no reason to know the tax would not be paid and would suffer economic hardship if not granted relief).
Thus, the court made an ultimate finding that Sherry was entitled to equitable relief and entered its decision giving effect to the stipulation between Petitioner and IRS.
© 2012 by Robert S. Steinberg, Esquire
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