Tax Court In Brief | Freman v. Comm'r | Innocent Spouse Relief Under Section 6015(b), (c), And (f)

• Jurisdiction: United States,Federal
• Law Firm: Freeman Law
• Subject Matter: Employment and HR, Tax, Retirement, Superannuation & Pensions, Income Tax, Tax Authorities
• Author: Freeman Law
• Published date: 11 February 2023

The Tax Court in Brief - January 23rd - January 27th, 2023

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 January 23rd, 2022, through January 27th, 2023

• Lim v. Comm'r, T.C. Memo. 2023-11| January 23, 2023 | Lauber, J. | Dkt. No. 14015-20
• Shilgevorkyan v. Comm'r, T.C. Memo 2023-12| January 23, 2023 | Ashford, J. | Dkt. No 9247-15
• Belton v. Comm'r, T.C. Memo. 2023-13| January 24, 2023 |Toro, J. | Dkt. No. 22438-19P
• Adams v. Comm'r, 160 T.C. No. 1| January 24, 2023 | Toro, J. | Dkt. No. 1527-21P
• Mulu v. Comm'r, T.C. Summary Opinion 2023-2| January 25, 2023 | Leyden, J. | Dkt. No 12975-21S
• Aragoni v. Comm'r, T.C. Summary Opinion 2023-3| January 25, 2023 | Panuthos, J. | Dkt. No 20914-21S
• Johnson v. Comm'r, 160 T.C. No. 2| January 25, 2023 |Nega, J. | Dkt. No. (Consolidated) 19973-18 19975-18, 19978-18, 20001-18

Freman v. Comm'r, T.C. Memo. 2023-10| January 23, 2023 |Jones, J. | Dkt. No. 8895-20

Summary: This Freman opinion is a 33-page analysis of, essentially, whether or not Ms. Freman is entitled to all or partial relief from tax liability pursuant to section 6015, the innocent spouse relief statute.

The Marriage. Kari Freman and Rodney Freman married in 1998. They had a child together. Ms. Freman has a high school education, was not employed outside of the home during the tax years at issue, and primarily took care of the couple's child. Mr. Freman was employed as a commodities trader. Finances were often a source of contention. They maintained joint checking and savings accounts. Mr. Freman had a retirement account through his employer. Mr. Freman was solely responsible for making all financial decisions and for handling the preparation and filing of tax returns. Ms. Freman was not given an opportunity to review the contents of their returns before signing them. Ms. Freman was hospitalized for a time in 2015 and was prescribed narcotics to help her with pain management. In 2012, Mr. Freman was diagnosed with an autoimmune disease that required him to obtain disability leave. The disability insurance was not enough to make ends meet. So, in tax year 2012 he took a taxable distribution from his retirement account. For the distribution, Ms. Freman signed a spousal consent form, thereby waiving her rights to the Qualified Annuity Benefit otherwise available under the retirement plan. Because of the limitations imposed by the plan, Mr. Freman was not permitted to borrow against his retirement account. So, Mr. Freman terminated his employment to take the distribution. Mr. Freman was rehired by the same company in 2014, and he continued his employment through at least 2015.

The Tax Liabilities - 2012, 2014, and 2015. For tax year 2012, the Fremans failed to timely file a return. The IRS prepared a substitute for return (SFR) that asserted a deficiency of $85,238 and withholding of $36,057. All income was attributable to Mr. Freman, including $172,342 of income for the taxable distribution from Mr. Freman's retirement account. After receiving the SFR, the Fremans filed Form 1040A. However, the Form 1040A did not report the taxable distribution from the retirement account or the taxes withheld. The IRS issued a revised examination report showing adjustments. The IRS issued a notice of deficiency, and neither filed a petition to challenge the notice. Later, the IRS assessed a deficiency of $60,953 and additions to tax and penalties. The Fremans established an installment plan but ultimately stopped making payments.

For tax year 2014, the Fremans filed an untimely joint return. It showed income tax liability of $6,789. Because of the untimeliness and the failure to make payment, the IRS assessed additions to tax.

For tax year 2015, the Fremans filed an untimely joint return. The 2015 tax return reported income tax liability of $8,064. The return did not report $11,883 in cancellation of indebtedness income attributable to Ms. Freman's credit card expenditures. Because of the untimeliness and the failure to make payment, the IRS assessed additions to tax.

The Divorce. Ms. Freman filed for divorce in 2017. A little later, Ms. Freman and the child moved into an RV. A judgment of dissolution was entered in or about July 2021.

Ms. Freman's Form 8857, Request for Section 6015 Spousal Relief. On February 21, 2019, the IRS's Cincinnati Centralized Innocent Spouse Operation (CCISO) received Ms. Freman's Form 8857, claiming she was unaware of her and Mr. Freman's tax liabilities. She reported that Mr. Freman (1) physically harmed or threatened her (specifically for financial matters), her children, or other family members, (2) made her afraid to disagree with him, (3) criticized or insulted her or frequently put her down, (4) withheld money for food, clothing, or other basic needs, and (5) made most or all of the decisions for her, including financial decisions. Ms. Freman's Form 8857 indicated that she had a checking account with $300, total monthly income of $1,160, and total monthly expenses of $1,910. Ms. Freman did not attach any supporting documentation to her Form 8857.

Mr. Freman's Response Form 12508, Questionnaire for Non-Requesting Spouse. In response to...