By: Dana M. Horlick, Attorney, Woodruff Family Law Group
Hollimon v. Comm’r, T.C. Memo. 2015-157, 2015 WL 4747779 (2015)
(a) Facts: During their marriage, the parties established and worked for a business providing temporary staffing to hospitals. The wife testified that the husband ran the business and she was an employee. The husband testified that the parties ran the business together.
“Unfortunately, Ms. Hollimon and Mr. Al Bakari’s relationship has been rife with abuse. The abuse has not been one sided; it has been perpetrated by both parties, and each of them has requested restraining orders against the other at various times.” 2015 WL 4747779, at *1.
The business was run out of the parties’ home. On their joint tax return for 2009, the parties claimed a credit for business use of their home. The wife testified that the husband prepared the return, and that she was scared to question it because of the risk of abuse. The husband testified that both parties prepared the return.
The IRS disallowed a portion of the credit for the business use of the parties’ home and assessed a deficiency. The wife filed Form 8857, seeking discretionary innocent spouse relief. The IRS denied relief and the wife appealed to the Tax Court. The IRS conceded that the wife was entitled to relief, but the husband intervened and opposed relief.
(b) Issue: Was the wife entitled to discretionary innocent spouse relief?
(c) Answer to Issue: Yes.
(d) Summary of Rationale: The wife met all threshold conditions except the last one, whether the tax at issue was attributable to income of the nonrequesting spouse. It was disputed whether the business income was attributable to the wife. But the court held that the dispute did not matter, because abuse is a recognized exception to the last condition, and abuse was present on the facts:
We find that Ms. Hollimon was a victim of abuse. Although the record is clear that each party to the marriage suffered abuse at the hands of the other, Ms. Hollimon testified unequivocally that she was afraid to question Mr. Al Bakari about the return for fear of retaliation. We do not believe that any abuse that Mr. Al Bakari may have suffered at the hands of Ms. Hollimon negates that fear. Accordingly, because Ms. Hollimon has satisfied the threshold conditions, we move to the next step.
Id. at *3. Thus, regardless of whether the wife at times abused the husband, the fact that the husband also abused the wife was sufficient to trigger the exception, in light of the wife’s express testimony that she was afraid to question the husband about the return.
The wife did not meet the “safe harbor” requirements because paying the tax would not result in economic hardship.
The court therefore considered the discretionary factors. Factors favoring relief were the fact that the parties were separated, the fact that the wife was abused, the fact that the wife did not materially benefit from nonpayment of support, and the fact that the wife struggled with diabetes and mental health issues. No factors opposed relief. The wife’s knowledge of the tax issues was neutral, on account of the fact that she was subject to abuse. Because a preponderance of the factors was favorable, the court granted relief.
- The only third-party evidence of abuse mentioned in the opinion is the restraining orders that each party obtained against the other. A state court restraining order, where recent and credible, would seem to be good proof of abuse for federal tax purposes.
- If one spouse actually refuses to inquire about tax issues because of fear of abuse from the other spouse, it does not matter whether the first spouse has, upon other occasions, abused the second spouse. There is no such thing as the doctrine of recrimination under federal tax law; abuse committed by a spouse does not cancel the effect of abuse committed on that spouse. The question is simply: Did abuse interfere with the requesting spouse’s ability to review the joint tax return or ask questions about tax issues?