In Gans v. Commissioner, the taxpayer prevailed over the Internal Revenue Service by establishing that she was abused by her husband, among others, and consequently qualified for relief from joint tax liability.
Married taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise because of a joint return, even if they later divorce. Each taxpayer is legally responsible for the entire liability. One spouse could be legally held liable for all the tax due, even if the other spouse earned all the income or claimed improper deductions or credits.
However, under certain circumstances, an innocent spouse could be relieved from a tax liability on a jointly filed tax return.
The tax court in Jessica Lynn Grady a.k.a. Jessica Lynn Gans v. Commissioner (T.C. Summary 2021-29) rejected the IRS determination that the taxpayer was not entitled to relief from liability under section 6015(f) for underpayments of joint federal income tax for the taxable years 2006, 2007, 2009, 2010, and 2011.
Ms. Gans timely filed a petition for review of the IRS’s determination under section 6015(e). The sole issue for decision is whether Ms. Gans qualifies for relief under section 6015(f) from liability for the underpayment of joint Federal income tax for 2006, 2007, 2009, 2010, or 2011. The Court holds that Ms. Gans is entitled to relief for each of the taxable years. The court found that Ms. Gans had been emotionally abused and neglected by her husband. The court concluded she did not gain any significant benefit from the non-payment of the joint tax liabilities.
There are seven (7) listed threshold conditions under Revenue Procedure 2013-34, section 4.01 (2013-43 I.R.B. at 399), that a spouse must meet to qualify for equitable relief under section 6015(f). The Internal Revenue Service concedes that Ms. Gans meets these qualifying conditions for all relevant years.
The Tax Court found that Ms. Gans meets the threshold conditions to be considered for equitable relief under section 6015.
The Tax Court noted the factors that weigh in favor of relief for Ms. Gans. They include 1) marital status – Ms. Gans was divorced at the time she filed the request for relief, 2) economic hardship, 3) Mr. Dickey’s legal obligation to pay the joint income tax liabilities, 4) lack of any significant benefit to Ms. Gans from the nonpayment of the joint income tax liabilities, 5) Ms. Gans’ compliance with the income tax laws, 6) the mental and emotional abuse she suffered and 7) her serious health problems.
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