Last month, the United States Tax Court (Tax Court) overturned an Internal Revenue Service (“IRS”) ruling, and granted innocent spouse status to the widow of former San Francisco Mayor Joe Alioto. Alioto v. Commissioner of Internal Revenue, T.C. Memo. 2008-185. Innocent spouse relief was allowed pursuant to Internal Revenue Code (IRC) Section 6015(f)
which allows relief if “taking into account all the facts and circumstances it is inequitable to hold the individual liable.” One of the tests that the Tax Court, and the IRS looks at in determining whether an individual is entitled to equitable innocent spouse relief is whether payment of the tax would cause an economic hardship. It is sometimes difficult to convince the IRS that anyone living at anything above the poverty level is suffering economic hardship, and this case was no different.
At the time of trial, Mrs. Alioto had about $100,000 in a retirement account, and little else in the way of assets. She was earning about $121,000 per year. The IRS determined that no economic hardship would ensue if Mrs. Alioto was forced to pay the approximately $2 million dollars that she owed as a result of filing a joint income tax return with the Mayor. The Tax Court took a more liberal view of things holding that indeed she would suffer economic hardship, and went on to allow 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.