Wilson v. C.I.R.

705 F.3d 980 (2013)

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Wilson v. C.I.R.

United States Court of Appeals for the Ninth Circuit
705 F.3d 980 (2013)

  • Written by Heather Whittemore, JD

Facts

Karen Marie Wilson (plaintiff) was married to Lloyd Wilson. In 1997 Lloyd started a venture-capital business that was actually a Ponzi scheme, and he began making approximately $20,000 each month. Karen prepared the couple’s joint tax return until 1997, when the couple hired an accountant. The couple did not report as part of their income the large amounts of money that Lloyd sent into offshore accounts. The Securities and Exchange Commission issued a cease-and-desist order against the business in 1999 and levied tax liability of $540,000. Karen was made aware of the unpaid tax liability in 1999 and thought her husband would pay it. The tax liability was not paid. In 2002 Karen applied for innocent-spouse relief from the Internal Revenue Service (IRS) (defendant) pursuant to § 6015(f) of the Internal Revenue Code. Karen alleged that she and Lloyd were estranged, that she could not afford to move out of their home, and that her monthly expenses exceeded her income. The IRS denied Karen’s request, finding Karen lacked a reasonable belief that the tax liability would be paid in 1999. Wilson appealed, and the IRS’s Office of Appeals determined that Wilson’s request should be denied. The appeals officer highlighted that the Wilsons were still married, that Karen knew of the tax liability in 1999, and that it seemed as if she owned half of the venture-capital business—and therefore half the tax liability was her own. Karen petitioned the United States Tax Court for a redetermination. The tax court conducted a de novo review and allowed Karen to submit additional evidence. The tax court granted Karen’s request for innocent-spouse relief. The IRS appealed.

Rule of Law

Issue

Holding and Reasoning (Thomas, J.)

Dissent (Bybee, J.)

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