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Like Pulling Teeth, Getting Innocent Spouse Relief can be a Tricky Process (Johnson v. Comm’r)

By: Dana M. Horlick, Attorney, Woodruff Family Law Group

Johnson v. Comm’r, T.C. Memo. 2014-240, 2014 WL 6676824 (2014)

(a) Facts: During her marriage, the wife owned and operated a dental practice. The parties filed a joint tax return in 2007, which correctly reported the tax due, but the parties had financial problems and were not able to pay the tax.

In 2010, the parties were divorced in California. Their settlement agreement provided that they would share tax debts equally.

The wife suffered from bipolar disorder, which she was able to manage successfully with medication.

The wife filed a request for innocent spouse relief from the 2007 tax liability. The IRS denied that request, and the wife appealed to the Tax Court. The husband intervened to oppose relief.

(b) Issue: Was the wife entitled to innocent spouse relief?

(c) Answer to Issue: No.

(d) Summary of Rationale: The last of the seven threshold conditions for granting innocent spouse relief provides that the tax at issue must be based upon the income of the nonrequesting spouse. That condition was not met; the tax was attributable to the income from the wife’s dental practice.

There are certain exceptions to the last threshold requirement. One of the exceptions is abuse. The wife alleged that she was involved in an emotionally abusive marriage, and alleges two instances that she considered abuse, but she did not call any third-party witnesses.  She had not raised abuse at all in the state court divorce proceedings.  She therefore failed to prove that she was abused, and she did not meet the final threshold condition for relief.

While the court’s primary holding was that the wife did not meet the threshold conditions, the court alternatively held that the wife was not entitled to relief even if she did meet the threshold conditions. She did not meet the “safe harbor” requirements, because she had not proved that she would suffer economic hardship if relief was denied. She was still working as a dentist, although she no longer owned her own practice and her income was somewhat sporadic. She also had reason to know that the husband would not pay more than his 50% share of the tax liability.

Since the wife did not meet the “safe harbor” conditions, relief would depend (on the continuing assumption that the wife met the threshold conditions, which the court held she did not) upon the discretionary factors. Factors favoring relief were the divorce of the parties, the fact that the wife did not benefit from nonpayment of tax, beyond normal support, and the fact that the wife was in compliance with tax law for future tax years. Factors opposing relief were that the wife would not suffer economic hardship, that it was unreasonable for the wife to believe that the husband would pay the entire tax, that the divorce decree required the husband to pay half of the tax (and he had already paid his half), and that the husband did not control household finances or abuse the wife. The wife’s health was a neutral factor, as she was able to work and support herself. Balancing the factors, the court held that the wife was not entitled to relief.


  1. When a spouse claims abuse in the Tax Court, but did not claim abuse in state court divorce proceedings, that may be a good indication that abuse is not present.
  1. It also seems like there must be some causal relationship between the abuse and the tax problem. There was no suggestion in Johnson that the very low level of abuse alleged by the wife had any effect upon the tax problem. If the events alleged as abuse had not occurred, it seems likely that the parties would owe exactly the same tax.
  1. The husband, who had already paid his 50% share of the tax liability, also had a pending petition for innocent spouse relief. That petition was not before the court. From the facts stated, the husband’s argument would seem reasonably strong.