Tax Court In Brief | Reynolds v. Comm'r | Spousal Relief, Substantial Benefit, Constructive Knowledge, And No Divorce

Published date07 December 2022
Subject MatterFinance and Banking, Tax, Financial Services, Income Tax, Tax Authorities
Law FirmFreeman Law
AuthorFreeman Law

The Tax Court in Brief - November 28th - December 2nd, 2022

Freeman Law's "The Tax Court in Brief" covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

For a link to our podcast covering the Tax Court in Brief, download here or check out other episodes of The Freeman Law Project.

Tax Litigation: The Week of November 28th, 2022, through December 2nd, 2022

  • Lipka v. Comm'r, T.C. Memo. 2022-116 | December 1, 2022 | Gustafson, J. |Docket No 11455-20L
  • Hallmark Research Collective v Comm'r, 159 T.C. No. 6 | November 29, 2022 | Gustafson | Dkt No. 21284-21
  • Showalter, v Commissioner, T.C. Memo 2022-114 | November 30, 2022 |Lauber, J.| Dkt. No. 13116-18
  • Heather P. Dunn and Edison Dunn v. Comm'r |T.C. Memo 2022-112 | November 29, 2022 | Wells, J. | Dkt. No. , No. 9996-17

Reynolds v. Comm'r, T.C. Memo. 2022-115 | November 30, 2022 |Wells, J. |Docket No. 14433-16

Short Summary: This case involves the IRS's denial of a taxpayer's request for innocent spouse relief following findings of deficiencies and assessment of penalties and interest for tax years 2004 through 2007. Most of the deficiencies resulted from the husband's embezzlement of funds his employer, a church where he served as the director of finance. However, deficiencies also arose from the couple's failure to report income earned by the wife including unemployment compensation, legal fees, and interest. The couple also failed to account for the wife's self-employment taxes and erroneously claimed deductions for her legal practice and certain child tax credits. The husband was incarcerated for the embezzlement in 2013. In 2014, the wife received a discharge of her debts in Chapter 7 bankruptcy and timely filed Form 8857, Request Innocent Spouse Relief. The coupled did not divorce or legally separate during the incarceration. During the bankruptcy, the family lost their home to foreclosure. The wife moved in with her parents until she was able to purchase a new home in 2016. Upon release from prison in 2018, the husband moved back in with the wife and their 5 children.

Key Issue: The Tax court evaluated whether the IRS appropriately denied the petitioner wife's request for innocent spouse relief on June 1, 2017.

Primary Holding: The petitioner wife was not entitled to full or partial relief under 6015(b), proportional relief under 6015(c), or equitable relief under 6015(f) and remained jointly and severally liable. The Tax Court evaluated the...

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