Taft v. Commissioner of Internal Revenue

T.C. Memo. 2017-66 (2017)

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Taft v. Commissioner of Internal Revenue

United States Tax Court
T.C. Memo. 2017-66 (2017)

Facts

Mrs. Taft (plaintiff), who held an associate’s degree and worked as a registered nurse, was married to Mr. Taft for over 20 years. Mr. Taft’s employer paid Mr. Taft partially in the employer’s stock. Mr. and Mrs. Taft maintained separate bank accounts, and Mrs. Taft had little involvement in the couple’s finances. Toward the end of the Tafts’ marriage, Mr. Taft began funding his support of a paramour by selling his stock. Mr. Taft sought to keep both the paramour’s existence and the sale of the stock a secret from Mrs. Taft. To that end, Mr. Taft instructed his accountant to file his and Mrs. Taft’s jointly filed income tax return without affording Mrs. Taft an opportunity to review it. The return failed to report several thousand dollars of taxable income from dividends, of which Mrs. Taft had no knowledge. The Internal Revenue Service (IRS) (defendant) assessed an additional tax liability accordingly. Mrs. Taft discovered the affair and divorced Mr. Taft. By the time of the divorce, Mr. Taft had depleted much of the couple’s savings. In a later year, Mrs. Taft overpaid her taxes and applied for a refund. The IRS used a portion of the overpayment to cover the unpaid tax liability attributable to the dividend income Mr. Taft had failed to report. Mrs. Taft appealed the reduction of her refund. The IRS determined that, although Mrs. Taft could be relieved of her joint and several liability for the dividend-attributable liability under § 6015(c) of the Internal Revenue Code, §6015(c) did not allow for a refund. Mrs. Taft petitioned the United States Tax Court, challenging the determination. Mrs. Taft argued before the Tax Court that she qualified for relief under § 6015(b), which did allow for a refund.

Rule of Law

Issue

Holding and Reasoning (Vasquez, J.)

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