(a) In general. A requesting spouse may be relieved of joint and several liability for tax (including additions to tax, penalties, and interest) from an understatement for a taxable year under this section if the requesting spouse elects the application of this section in accordance with §§ 1.6015-1(h)(5) and 1.6015-5, and—
(1) A joint return was filed for the taxable year;
(2) On the return there is an understatement attributable to erroneous items of the nonrequesting spouse;
(3) The requesting spouse establishes that in signing the return he or she did not know and had no reason to know of the understatement; and
(4) It is inequitable to hold the requesting spouse liable for the deficiency attributable to the understatement.
(b) Understatement. The term understatement has the meaning given to such term by section 6662(d)(2)(A) and the regulations thereunder.
(c) Knowledge or reason to know. A requesting spouse has knowledge or reason to know of an understatement if he or she actually knew of the understatement, or if a reasonable person in similar circumstances would have known of the understatement. For rules relating to a requesting spouse's actual knowledge, see § 1.6015-3(c)(2). All of the facts and circumstances are considered in determining whether a requesting spouse had reason to know of an understatement. The facts and circumstances that are considered include, but are not limited to, the nature of the erroneous item and the amount of the erroneous item relative to other items; the couple's financial situation; the requesting spouse's educational background and business experience; the extent of the requesting spouse's participation in the activity that resulted in the erroneous item; whether the requesting spouse failed to inquire, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question; and whether the erroneous item represented a departure from a recurring pattern reflected in prior years' returns (e.g., omitted income from an investment regularly reported on prior years' returns).
(d) Inequity. All of the facts and circumstances are considered in determining whether it is inequitable to hold a requesting spouse jointly and severally liable for an understatement. One relevant factor for this purpose is whether the requesting spouse significantly benefitted, directly or indirectly, from the understatement. A significant benefit is any benefit in excess of normal support. Evidence of direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understatement. Thus, for example, if a requesting spouse receives property (including life insurance proceeds) from the nonrequesting spouse that is beyond normal support and traceable to items omitted from gross income that are attributable to the nonrequesting spouse, the requesting spouse will be considered to have received significant benefit from those items. Other factors that may also be taken into account, if the situation warrants, include the fact that the requesting spouse has been deserted by the nonrequesting spouse, the fact that the spouses have been divorced or separated, or that the requesting spouse received benefit on the return from the understatement. For guidance concerning the criteria to be used in determining whether it is inequitable to hold a requesting spouse jointly and severally liable under this section, see Rev. Proc. 2000-15 (2000-1 C.B. 447), or other guidance published by the Treasury and IRS (see § 601.601(d)(2) of this chapter).
(e) Partial relief—(1) In general. If a requesting spouse had no knowledge or reason to know of only a portion of an erroneous item, the requesting spouse may be relieved of the liability attributable to that portion of that item, if all other requirements are met with respect to that portion.
(2) Example. The following example illustrates the rules of this paragraph (e):
Example.H and W are married and file their 2004 joint income tax return in March 2005. In April 2006, H is convicted of embezzling $2 million from his employer during 2004. H kept all of his embezzlement income in an individual bank account, and he used most of the funds to support his gambling habit. H and W had a joint bank account into which H and W deposited all of their reported income. Each month during 2004, H transferred an additional $10,000 from the individual account to H and W's joint bank account. W paid the household expenses using this joint account, and regularly received the bank statements relating to the account. W had no knowledge or reason to know of H's embezzling activities. However, W did have knowledge and reason to know of $120,000 of the $2 million of H's embezzlement income at the time she signed the joint return because that amount passed through the couple's joint bank account. Therefore, W may be relieved of the liability arising from $1,880,000 of the unreported embezzlement income, but she may not be relieved of the liability for the deficiency arising from $120,000 of the unreported embezzlement income of which she knew and had reason to know.[T.D. 9003, 67 FR 47285, July 18, 2002]
Notes of Decisions
Cited in
45
cases, 2003–2020 · leading case:
Thomassen v. Comm'r, 2011 T.C. Memo. 88 (Tax Ct. 2011).
Thomassen v. Comm'r, 2011 T.C. Memo. 88 (Tax Ct. 2011).
· cites it 8× “Factors to consider in analyzing whether the requesting spouse had "reason to know" of the understatement include: (1) The spouse's level of education; (2) the spouse's involvement in the family's business and financial affairs; (3) the presence of expenditures that appear…”
In re Wyly, 552 B.R. 338 (Bankr. N.D. Tex. 2016).
· cites it 3× “This agreement is contingent upon (i) the SDNY Court’s determination of foreign grant- or trust status being affirmed on appeal, which appeal is currently pending before the Second Circuit Court of Appeals, and/or (ii) this Court’s collateral estoppel decision being affirmed on…”
Canty v. Comm'r, 2016 T.C. Memo. 169 (Tax Ct. 2016).
· cites it 10× “A requesting spouse has reason to know of an understatement "if a reasonable person in similar circumstances would *176 have known of the understatement." Sec. 1.6015-2(c), Income Tax Regs.”
Cutler v. Comm'r, 2013 T.C. Memo. 119 (Tax Ct. 2013).
· cites it 4× “4.03(a)(v). "A significant benefit is any benefit in excess of normal support.”
Sriram v. Comm'r, 2012 T.C. Memo. 91 (Tax Ct. 2012).
· cites it 2× “In failing to pay their 2000 tax liability through withholding or estimated tax payments, the Srirams were able to repay the mortgage on the Lake Forest residence, maintain the rental properties, and fund the CD in part. In not paying the 2000 liability from 2001 through 2005,…”
Hall v. Comm'r, 2014 T.C. Memo. 171 (Tax Ct. 2014).
· cites it 10× “A requesting spouse has reason to know of an understatement "if a reasonable person in similar circumstances would have *199 known of the understatement." Sec. 1.6015-2(c), Income Tax Regs.”
Rick Jacobsen v. CIR, 950 F.3d 414 (7th Cir. 2020).
· cites it 2× “The Tax Court also considered the factors set forth in 26 C.F.R. § 1.6015-2 (c) (containing a non-exhaustive list of facts and circumstances relevant to concluding whether the request- ing spouse should have known of the understatement) and concluded that Jacobsen likewise had…”
Levy v. Comm'r, 2005 T.C. Memo. 92 (Tax Ct. 2005).
· cites it 2× “Because we believe that petitioner has failed to meet her burden of showing she had no reason to know of the 1979 deficiency under the more lenient approach, any disparity between that more lenient approach and the Tax Court's approach is immaterial to our disposition of this…”
Marriage of Rose, 2016 MT 7 (Mont. 2016).
· cites it 2× “” 26 C.F.R. § 1.6015-2 (d). The record before the District Court does not substantiate any factual determinations made either by the IRS or by the Department in awarding Sherri innocent spouse relief.”
Wilson v. Comm'r, 2017 T.C. Memo. 63 (Tax Ct. 2017).
· cites it 2× “; see also Cheshire v. Commissioner , 115 T.C. at 195 (stating that the knowledge standard for purposes of section 6015(c)(3)(C) is an actual and clear awareness of the existence of the item giving rise to the deficiency).”
Karam v. Comm'r, 2011 T.C. Memo. 230 (Tax Ct. 2011).
· cites it 2× “6015-2(d), Income Tax Regs. A significant benefit may be direct or indirect.”
Torrisi v. Comm'r, 2011 T.C. Memo. 235 (Tax Ct. 2011).
· cites it 2× “Whether the nonrequesting spouse has a legal obligation to pay the outstanding income tax liability pursuant to a divorce decree or agreement. * * * (v) Significant benefit .”
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