The Innocent Spouse case of the month is Ladehoff v Commissioner, T.C. Summary Opinion 2012-15 (February 27, 2012).  This case was heard under the Small tax case procedures, elected by the petitioner under Section 7463, and may not be cited as precedent for any other case.  I choose this case because it illustrates what can happen when ignorant taxpayers prepare their own return and then to make matters worse exhibit tenacious stupidity in appealing the obvious consequences of their ignorance. 

The facts are more comical than complex:

• The former husband (Husband) seeks relief under Section 6015 arguing he is an innocent spouse.
• The former wife did not intervene thank goodness.
• They were married in 1997 and divorced in January 2009.
• They timely filed a joint return for 2008 in April 2009 and remitted the balance due upon filing.
• Husband prepared the return based on documents the ex-wife gave him.
• On Schedule H, for unknown reasons, Husband multiplied the total household worker wages by ½ of the percentages stated on the Form as required Social Security and Medicare Taxes.
• IRS reviewed the return and made a math error assessment in the amount of $1,323 on account of the Schedule H error and another error in computing the child tax credit.
• Husband timely filed Form 8857, went to appeals and not surprisingly was denied relief under Sections 6015(b), (c) and (f).

Husband’s brilliant argument:

He argued to the court that the 2008 return was fraudulent and that the erroneous items were attributable to his ex-wife.  He testified that she kept the employment records for the home workers who were family members providing child care services for the couple’s kids.  He submitted no other evidence apart from this brilliant testimony.   The Court basically said: Dummy!  “Even if the Court accepts (your) testimony that … ex-wife falsified records, her actions would not explain why (you) used only half of the applicable percentages to calculate the Schedule H taxes. The erroneous items are attributable to either or both taxpayers.”  Da!

The court also found that Husband having prepared the returns himself and calculated the erroneous employment taxes and child tax credit could not claim that he lacked either actual knowledge or reason to know of the errors.

Husband’s last gasp was at obtaining equitable relief by claiming spousal abuse.  This is a common allegation by wives in divorce cases so I guess Husband thought he’d try it out in Tax Court.  He testified that he had been physically and emotionally abused.  Admissible evidence was adduced of two police reports of domestic incidents.  The first occurred on July 4, 2008 and states that Husband had refused to file a domestic battery report. The second incident report was dated May 14, 2009, after the joint return had been filed. In both reports Husband was listed as the victim and the ex-wife was listed as the “other person involved,” in the first report coded as “spouse” and in the second, as “the second victim.” 

The court did not buy his argument stating, “Petitioner’s (Husband’s) evidence of abuse does not rise to the level of abuse that would keep him from challenging the treatment of the items on the return for fear of his ex-wife’s retaliation.”

Thus, the court made an ultimate finding that Husband is not entitled to relief from joint and several liability under any of the escape hatches contained in Section 6015.

IRS has issued new guidelines for granting equitable relief under Section 6015(f) but this Husband on these facts would not qualify under any set of reasonably applied rules of equity.   If they had an exception for stupidity, the result might be otherwise.   This is the sort of case that makes me thankful I am not a Tax Court Judge who must listen to this nonsense.

© 2012 by Robert S. Steinberg, Esquire
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