I. Introduction to Tax Controversies
a. 7805- Authorization for rules and regulations.
i. Chevron- 1. Look at statute- if court thinks statute is clear, then done. 2. If court does not think it is clear, look at regulation. If regulation is reasonable, then follow the regulation. It is not always clear whether Chevron applies.
ii. If Chevron does not apply, consider applying Skidmore/Mead- It is a multifactor balancing test: The weight given an agency interpretation depends on: how thoroughly the agency considered things, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade.
c. Reporting Obligations (Ch. 2)
i. 6001- Every person liable for any tax imposed by this title, or for the collection thereof, shall keep such records, render such statements, make such returns, and comply with such rules and regulations as the Secretary may from time to time prescribe.
ii. 6013- Joint returns
iii. 6020- returns prepared for or executed by Secretary
iv. 6072- Time for filing income tax returns
v. 6081(a)- authorizes IRS to “grant a reasonable extension of time for filing any return, declaration, statement or other document. When you file extension of time to file tax return, you don’t get an extension of time to pay.
vi. 6103(a)- Confidentiality and disclosure of returns and return information
vii. 6159- Agreements for payment of tax liability in installments
viii. 6702- frivolous tax submissions
ix. 7502- Timely mailing treated as timely filing and paying
x. 7503- Time for performance of acts where last day falls on Saturday, Sunday, or legal holiday
II. Innocent Spouse Relief (Ch. 3) (Form 8857)
a. Married Couples are jointly and severally liable for the accuracy and payment of the amounts shown on their joint returns.
b. 6013(d)- If a joint return is made, the tax shall be computed on the aggregate income and the liability with respect to the tax shall be joint and several.
c. 1.6013-4(d)- return signed under duress is not a joint return.
d. 3 Types of Innocent Spouse Relief
i. A spouse seeking innocent spouse relief under subsection (b) has the burden to prove each of the following elements:
1. A joint income tax return was filed (or deemed to have been filed);
2. A timely election was made;
a. The election must be made no later than two years after the date on which the IRS began “collection activity” with respect to the electing spouse. Regulation 1.6015-5(b)(2) explains collection activity- issuance of a CDP notice, application of a refund otherwise due to electing spouse against the joint return liability, issuance of a notice of levy against property in which the spouse making the election has an ownership interest, etc.
3. There is an understatement in income tax attributable to erroneous items of the other spouse;
4. In signing the return, the spouse did not know there was an understatement on the return and did not have reason to know of its existence;
a. The IRS looks at certain sub-factors
i. Nature and amount of the item
ii. Financial situation of the couple and standard of living
iii. Education and experience of requesting spouse
iv. Whether a reasonable person would have inquired about the activity
v. Whether the item giving rise to the understatement is different from a position taxpayer has taken on previous returns
b. Omitted Income Case- Courts look to whether the spouse requesting relief knew or had reason to know of either the omitted income itself or the transaction giving rise to the omitted income.
c. Deduction Case- Courts look at if the spouse knew or through inquiry should have learned of the transaction giving rise to an erroneous deduction.
5. Taking into account all the facts and circumstances, it would be inequitable to hold the request
bused or was or is in poor mental or physical health.
h. The TP can seek relief under more than one subsection- “In the alternative, if I’m not granted relief under b or c, then I request relief under f” Regulation 1.6015-1h5, 1a2- talks about the IRS considering equitable relief even if it is not filed. You wouldn’t want IRS to consider because reg. bars TP to later file under (f) if they lose job. Innocent Spouse Determinations are made by Appeals Officers. Once the IRS has made its decision, you can appeal in tax court. Tax Court will review this de novo.
i. 6330- Notice and Opportunity for Hearing Before Levy
j. 1.6015-7- (b) Time period for petitioning the Tax Court. Pursuant to section 6015(e), the requesting spouse may petition the Tax Court to review a denial of relief under § 1.6015-1 within 90 days after the date notice of the Service’s final determination is mailed by certified or registered mail (90-day period). If the IRS does not mail the requesting spouse a final determination letter within 6 months of the date the requesting spouse files an election under § 1.6015-2 or 1.6015-3, the requesting spouse may petition the Tax Court to review the election at any time after the expiration of the 6-month period, and before the expiration of the 90-day period. The Tax Court also may review a claim for relief if Tax Court jurisdiction has been acquired under another section of the Internal Revenue Code such as section 6213(a) or 6330(d).
k. 1.6015-6- (a) In general. (1) When the Internal Revenue Service receives an election under § 1.6015-2 or 1.6015-3, or a request for relief under § 1.6015-4, the Internal Revenue Service must send a notice to the nonrequesting spouse’s last known address that informs the nonrequesting spouse of the requesting spouse’s claim for relief. For further guidance regarding the definition of last known address, see § 301.6212-2 of this chapter. The notice must provide the nonrequesting spouse with an opportunity to submit any information that should be considered in determining whether the requesting spouse should be granted relief from joint and several liability.