On October 10, 2019, Christine wrote about the provision added to the innocent spouse section by the Taxpayer First Act and the discussion of that section during the Fall ABA Tax Section meeting. Christine’s post highlights some of the issues concerning this section that we have discussed before, here with links to two posts by Carl that came out when the language in the statute first appeared. The new provision concerns and confuses those of us practicing in this area and Christine provides a link to the first response on IRC 6015(e)(7) filed by the IRS in the Tax Court. If you haven’t read Christine’s post or the earlier posts on this issue, you might want to do that as background to the new information presented today.
On October 15, 2019, the Tax Court issued two innocent spouse opinions — one relieving the taxpayer (Kruja, under (c)), the other not (Sleeth, under (f)). These are the first two opinions that even mention section 6015(e)(7), adopted by the Taxpayer First Act. Carl Smith noticed the opinions and sent a message to the rest of us on the blog team. Most of what follows is taken from Carl’s email as he discusses what two Tax Court judges said about the new provision in each case. There have been two other opinions concerning 6015 relief issued after the Taxpayer First Act added subsection (e)(7) on July 1, but these opinions did not mention subsection (e)(7): Ogden v. Commissioner, T.C. Memo. 2019-88 (issued 7/15/19), and Welwood v. Commissioner, T.C. Memo. 2019-113 (issued 9/4/19). Thus, today’s opinions are the first to even acknowledge the new subsection’s application to currently-pending Tax Court cases.
In Kruja v. Commissioner, T.C. Memo 2019-136 the court said:
Because the trial evidence was merely cumulative of what was already included in the administrative record, section 6015(e)(7) does not affect the outcome of this case. As a result, we have not addressed the effect of section 6015(e)(7).
In Sleeth v. Commissioner, T.C. Memo 2019-138 the court said:
We decide this case pursuant to section 6015(e)(7) as the administrative record has been stipulated into evidence and the testimony taken at trial was not available in the administrative record.
In Kruja the taxpayer was unrepresented. The taxpayer appears to have resided in Arizona at the time of filing her petition. In Sleeth the taxpayer was represented by counsel. The taxpayer lived in Alabama at the time of filing her petition. In both cases the husband intervened. Sleeth is a rare case in which the petitioning spouse loses after an intervention.
Sleeth’s statement that the testimony “was not available in the administrative record” could mean that everything on which testimony was taken in Tax Court was newly discovered or previously unavailable at the time the determination was made. However, I seriously doubt that is the case if one carefully read through the testimony. I hope Judge Goeke is making a ruling that anything testified to at trial (regardless of whether it is newly discovered or previously unavailable at the time the determination was made) is admissible as part of what the Tax Court reviews. That would be a readoption of Porter I’s holding of a de novo scope of Tax Court record. See Porter v. Commissioner, 130 T.C. 115 (2008) (en banc). But, I seriously doubt that is what Judge Goeke intends to say.
Thanks for Carl for finding these opinions and providing his insight. As you can see from these opinions the new provision applies to innocent spouse cases already tried as well as those pending. Since the first two opinions do not require a retrial, reopening the record or additional briefs, perhaps that pattern will follow in decisions to come. Anyone with a pending innocent spouse case needs to pay careful attention to this issue and develop the record accordingly.