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Date Submitted: 03/13/2011 12:15 PM
Carlos Tovar
Federal Taxation
March 6, 2011
Article Brief: “Innocent Spouse Relief: Alternatives After the Lantz Case”
Article Brief: “Innocent Spouse Relief: Alternatives After the Lantz Case”
The dilemmas described in the Lantz case reflect the high level of ambiguity that a filing spouse experiences when challenging IRC 6015 provisions for an Innocent Spouse Claim. Specifically, the stipulated filing timeframe in sub-section (F) of IRC 6015 – Equitable Relief. In general, there’s major discrepancies between the tax courts’ and IRS’ interpretation as to when the Equitable Relief application should be filed by the innocent spouse according to what’s referenced in sub-section F of the code. Such case brings about uncertainty when tax planners advice their clients on how to better strategize when in this situation, and better yet, avoiding it all together.
Although the basic background and scope of code IRC 6015 and its sub-sections are fundamentally important, there are other components that bring about the controversy surrounding the provision. The most relevant is perhaps the fact that although sections 6015(B) and (C) requires requesting relief by filing form 8857 within two years of the initiation of an IRS collection activity with respect to the innocent spouse, section (F) contains no mention of a time limit for filing. Nevertheless, the IRS applies the same two-year limit to the equitable relief under section 6015 (F).
Taking these points of controversy in consideration, one can further explore
the effect of the Lantz case, where the innocent spouse failed to file for section (F) within two years of the IRS notice of intention to levy. Consequently, the IRS denied Lantz’s claim for equitable relief based on the expired filing deadline, and Lantz’s argued that the time limit regulation on section (F) was invalid. In the first instance, the Tax Court ruled in favor of Lantz because it reasoned that section (F) did not implicitly...