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Innocent Spouse

On January 19, 2015 posted in IRS Representation Blog

Innocent Spouse

DENTAL SURGEON SPOUSE NOT SO INNOCENT, SAYS TAX COURT

A female dental surgeon did not get innocent spouse relief from a joint tax liability with her former-husband because one key fact was against her: the unpaid tax came from her dental practice income and none of it was attributable to her husband. The Wife had Schedule C income of $24,007 from her dental practice, capital gain of $203,236 from the sale of her practice, and a $44,076 gain from the sale of business property related to her dental practice. The “innocent spouse” tax rules can be invoked to cut off joint liability for one spouse because of the other spouse’s bad behavior—usually hiding income, fraud, bullying, nonpayment of taxes, etc. To get equitable relief, the following requirements must be met:

(1) The requesting spouse filed a joint return.

(2) Relief is not available to the requesting spouse under the regular procedures.

(3) The claim for relief is filed on time.

(4) No assets were transferred between the spouses as part of a fraudulent scheme by the spouses.

(5) The other spouse did not transfer disqualified assets to the requesting spouse.

(6) The requesting spouse did not knowingly participate in the filing of a fraudulent joint return.

(7) The income tax is attributable to the other spouse’s income.

 

Here’s the case: Lindsay M. Johnson, Petitioner, and Joshua T. Hart, Intervenor.

 

For more on equitable innocent spouse relief, see http://www.irs.gov/taxtopics/tc205.html