By: Dana M. Horlick, Attorney, Woodruff Family Law Group
Agudelo v. Comm’r, T.C. Memo. 2015-124, 2015 WL 4086310 (2015)
(a) Facts: A husband and wife filed a joint tax return for tax year 2010. The return did not report as income certain unemployment benefits received by the husband. The IRS discovered this fact and assessed a deficiency.
The husband filed a request for innocent spouse relief. In support of that request, he testified that the wife had taken the benefit checks without his knowledge. The wife intervened and testified that she never opened the husband’s mail for him. By the time of trial, the parties were separated, though not yet divorced.
(b) Issue: Was the husband entitled to innocent spouse relief?
(c) Answer to Issue: No.
(d) Summary of Rationale: One of the threshold conditions for innocent spouse relief is proof that the tax at issue is based upon the nonrequesting spouse’s income. The tax at issue here was based upon the husband’s own income.
For discretionary innocent spouse relief, there are a series of exceptions to this rule, one of which applies when there is proof of misappropriation of funds. The husband relied upon that exception, arguing that the wife misappropriated his benefit checks. The court therefore had to answer a factual question: who received the checks?
The testimony of the parties on this point was directly conflicting. But there was third-party evidence that could have resolved the matter. The checks themselves had been subpoenaed from a bank, and the signatures on the back would have determined which spouse cashed them. These checks were produced, but the husband refused to sign a stipulation authenticating them, so the checks were not admitted into evidence. The court found his conduct highly suspicious:
“The rule is well established that the failure of a party to introduce evidence within his possession and which, if true, would be favorable to him, gives rise to the presumption that if produced it would be unfavorable.” Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165, 1946 WL 298 (1946), aff’d, 162 F.2d 513 (10th Cir.1947). That presumption applies squarely to Mr. Agudelo.
2015 WL 4086310, at *3. Because the husband failed to produce favorable evidence within his control, the court presumed that the evidence would have been adverse to him, and held that the husband had received the checks. The misappropriation exception therefore did not apply, and the husband could not obtain innocent spouse relief from tax based upon his own income.
The husband also argued that the wife abused him during the marriage, and produced a state court restraining order against further abuse. But the facts showed that the order was obtained ex parte and without notice to the wife. The wife was arrested for spousal abuse in 1997, but the arrest was too remote in time to be relevant. The husband filed a police report claiming abuse in 2012, but the report was not credible. “Furthermore, Mr. Agudelo did not establish any causal relationship between the alleged abuse and the omission of his unemployment compensation income from his and Ms. Arias’s joint tax return.” Id. at *9. The court therefore held that the abuse exception did not apply.
- If a subpoena produces third-party evidence that will resolve a direct conflict in the testimony, and one spouse refuses to sign a stipulation authenticating that evidence, without articulating a plausible reason why the evidence is not genuine, the Tax Court is likely to draw the obvious conclusion that the evidence was adverse to the party who refused to sign.
- Again, third-party evidence of abuse is always preferable.
- Old, outdated proof of a single incident of abuse is unlikely to convince the Tax Court to find a pattern of abuse continuing into the present.
- Evidence that abuse was claimed in state court is unlikely to be persuasive, where there is evidence that the abuse claim was not pursued because of evidentiary weakness.
- The stature test: If the spouse claiming abuse is tall and strong, and the allegedly abusing spouse is small and weak, it is likely to take strong evidence to convince a court that the smaller spouse abused the larger one.