June 2008 Archives

Innocent Spouse Relief Granted by Tax Court

June 13, 2008,

The United States Tax Court (Tax Court) granted innocent spouse relief to Chrystina Nihser, overturning a decision by the Internal Revenue Service (IRS) . Nihser v. Commissioner, T.C. Memo 2008-135. Ms. Nihser had applied for innocent spouse relief under Internal Revenue Code § 6015(f), so called “equitable relief.” This is, in my view, the most difficult type of innocent spouse relief to obtain.

In ruling that the IRS had abused its discretion in not granting innocent spouse relief, the Tax Court applied the eight-factor balancing test of Rev. Proc. 2000-15, 2001-C.B. 448. One of the eight factors is whether or not the requesting spouse suffered “abuse” at the hands of the non-requesting spouse, and the case contains a lengthy discussion of what constitutes “abuse” for the purposes of determining whether equitable innocent spouse relief is available. The Tax Court held that something less than physical abuse may qualify. The Tax Court looked to the medical literature to create at least a partial list of the factors deemed to be psychologically abusive. It determined that a psychologically abusive spouse is one who may: (1) isolate the victim; (2) encourage exhaustion by, for example, intentionally limiting food or interrupting sleep; (3) behave in an obsessive or possessive manner; (4) threaten to commit suicide, to murder the requesting spouse, or to cause the death of family or friends; (5) use degrading language including humiliation, denial of victim’s talents and abilities, and name calling; (6) abuse drugs or alcohol, including administering substances to the victim; (7) undermine the victim’s ability to reason independently; or (8) occasionally indulge in positive behavior in order to keep hope alive that the abuse will cease.

Based upon these factors the Tax Court decided that Ms. Nihser had been abused, and in part because she met that test, the IRS had abused its discretion in failing to grant her request for innocent spouse relief.

If you have a tax problem, and believe that you maybe qualify for innocent spouse relief contact the tax litigation lawyers at Brager Tax Law Group, A P.C.

Innocent Spouse Relief Available Despite Incomplete Adminstrative Record

June 10, 2008,

The United States Tax Court (Tax Court) has held that in innocent spouse cases under Internal Revenue Code (IRC) § 6015 it will consider evidence at trial that was not part of the administrative record. Porter v. Commissioner, 130 T.C. No. 10 (2008). The innocent spouse ruling in Porter was consistent with the Tax Court’s earlier ruling in Ewing v. Commissioner, 122 T.C. 32 (2004), vacated on unrelated jurisdictional grounds 439 F.3d 1009 (9th Cir. 2006).

Ms. Porter submitted a Form 8857, Request for Innocent Spouse Relief to the IRS. Ultimately, the IRS granted innocent spouse relief as to a portion of the tax liability, but denied innocent spouse relief with respect to the remainder. Ms. Porter filed a Petition with the Tax Court to dispute the Internal Revenue Service's unfavorable determination. When she got to the Tax Court, the IRS tried to prevent Ms. Porter, who was not represented by a tax attorney, from presenting all of her evidence. The IRS tax attorneys argued that judge could only here evidence that had previously been submitted to the IRS. The Tax Court held that in cases where someone is requesting innocent spouse relief, he or she is entitled to a trial de novo. That is she is entitled to present all of her evidence without regard to whether it was previously provided to the IRS.

If you believe that you may be entitled to innocent spouse relief contact the tax attorneys at Brager Tax Law Group, A P.C.

Tax Fraud Scheme Alleged by IRS

June 5, 2008,

The Internal Revenue Service (“IRS”) is alleging a massive tax fraud scheme by two European bankers. They have been indicted by a federal grand jury for conspiracy to defraud the IRS pursuant to 18 U.S.C 371. According to the indictment among other things Bradley Birkenfeld, a former USB banker and US citizen, and Mario Staggl, a Liechtenstein citizen and resident, assisted an unnamed United States real estate developer in evading United States income taxes on approximately $200 million of assets held in offshore bank accounts.

The defendants allegedly committed tax fraud by falsifying Swiss Bank documents, by falsifying IRS Forms W-8BEN, by failing to issue IRS Forms 1099, by failing to prepare IRS Forms W-9, and by failing to adhere to the terms of the Qualified Intermediary Agreement with the IRS. The Qualified Intermediary Agreement was a voluntary agreement made between the Swiss Bank and the IRS in 2001 to which the Swiss Bank agreed to identify and document any customers who received reportable United States source income, as well as file appropriate tax documents with the IRS. This agreement was a departure from previous Swiss Bank secrecy laws which concealed bank information for US clients from the IRS. The defendants helped their US clients conceal their ownership of the accounts therefore evading the Swiss Banks obligation to report that information to the IRS.

According to the press release issued by the Department of Justice Tax Division the defendants marketed their services to wealthy United States clients by claiming that Swiss and Liechtenstein bank secrecy was impenetrable and could help their clients evade United States income taxes. The conspirators allegedly assisted their US clients in preparing false IRS documents, advised their clients to destroy any records of offshore bank accounts, and facilitated the filing of false IRS tax returns.

I would imagine that all of their clients are now meeting with their tax attorneys to see if they qualify for the IRS voluntary disclosure program so they can avoid criminal tax evasion charges.

If you have concerns about exposure to tax fraud schemes call the tax lawyers at Brager Tax Law Group, A P.C.