By: Dana M. Horlick, Attorney, Woodruff Family Law Group
Demeter v. Comm’r, T.C. Memo. 2014-238, 2014 WL 6645592 (2014)
(a) Facts: A husband and wife were married. During the marriage, the husband started a business, Sunshine Framing and Finishing (“Sunshine”). The wife was added as a vice president in 2008. She ran errands for the company and helped with its bookkeeping, but did not receive a salary. Sunshine’s bank account was used for personal expenses as well as business expenses; the parties had no individual bank accounts.
The husband retained an attorney to file the parties’ joint tax returns for 2004, 2005, and 2006, which were filed late in 2008. The wife never met the attorney, and signed the returns without reading them.
The returns reported tax due, which the husband did not pay. The wife was not aware that tax was due until the IRS began collection proceedings. She confronted the husband about the tax debts, and he promised to pay them. The parties eventually filed bankruptcy.
Shortly before the end of the bankruptcy case, the parties were divorced in Florida. The divorce decree incorporated a separation agreement, in which the husband agreed to pay all outstanding tax debt.
The husband failed to comply with the agreement, and was held in contempt by a Florida court. As part of the contempt proceedings, he signed an Affidavit For IRS Innocent Spouse Determination, reaffirming that he was responsible for all back taxes.
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