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Individual Tax

District Court Had Jurisdiction Over Innocent Spouse Claim Because Taxpayer Filed Refund Suit There

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

The Tax Court determined that a district court had jurisdiction over a taxpayer’s innocent spouse claim. Once the taxpayer filed her refund claim in the district court it had jurisdiction over the entire liability for that tax year, including her claim for any tax erroneously or illegally assessed or collected.

Innocent spouse relief. The Tax Court has jurisdiction to determine the appropriate relief from joint and several liability on a joint return (“innocent spouse relief”) in certain circumstances. (Code Sec. 6015(e))

However, if either individual who filed the joint return files a refund suit a federal district court or the Court of Claims, the Tax Court loses jurisdiction of the individual’s innocent spouse claim to the extent that the district court of the Court of Claims has acquired jurisdiction over the tax years that are the subject of the refund suit. (Code Sec. 6015(e)(3)(A))

In that case, the court acquiring jurisdiction over the refund suit has jurisdiction over the innocent spouse claim. (Code Sec. 6015(e)(3)(B))

Facts. After her husband died, Ms. Coggin discovered that he had filed joint returns for 2001-2009 without her knowledge. Ms. Coggin filed separate amended tax returns claiming refunds for years 2001-2009. The IRS denied these refund claims.

Ms. Coggin then filed suit in district court seeking refunds for 2001-2007. The court dismissed Ms. Coggin’s refund claims. However, the district court retained jurisdiction over the IRS’s counterclaim for the taxes owed on the joint returns.

Ms. Coggin never mentioned innocent spouse relief in the district court proceedings until after the district court granted the IRS summary judgment for the amounts due on the 2001-2007 joint returns. The district court also held that it “has not evaluated and makes no ruling on whether the innocent spouse exception relieves Ms. Coggin of liability” for the taxes owed to the IRS.

Ms. Coggin then submitted to the IRS Form 8857, Request for Innocent Spouse Relief, for years 2001-09. A few days later Ms. Coggin filed a motion to stay the district court proceedings, which the district court granted while retaining jurisdiction over the case. When the IRS denied her claim for innocent spouse relief for 2001-2009, Ms. Coggin filed a petition for redetermination of her innocent spouse claim in the Tax Court.

District court has jurisdiction over innocent spouse claims. The Tax Court held that the district court that had jurisdiction over Ms. Coggin’s refund claims also had jurisdiction over her innocent spouse claims.

The Tax Court notes that under Code Sec. 6015 innocent spouse claims may be brought in a legal forum other than the Tax Court. For example, innocent spouse claims can be raised as a defense in an IRS collection proceeding in district court.

Tax Court reviews the case law discussing innocent spouse issues in refund suits. In some cases district courts have held that if a taxpayer files a valid refund suit after her innocent spouse claim has been denied by the IRS, the district court has jurisdiction to determine the taxpayer’s entitlement to a refund on the basis of innocent spouse relief. In other cases, district courts have jurisdiction to decide an innocent spouse claim only when the taxpayer files a refund suit in the district court while an innocent spouse claim is pending with the Tax Court. In this second group of cases, the Tax Court loses jurisdiction over the taxpayer’s innocent spouse claim to the extent jurisdiction is acquired by a district court or the Court of Claims.

After reviewing the case law, the Tax Court determined that because the district court had jurisdiction over Ms. Coggin’s refund claim for tax years 2001-2007, the district court, not the Tax Court, had jurisdiction over her innocent spouse claim for those years.

However, the district court did not acquire jurisdiction over Ms. Coggin’s refund claims for 2008 and 2009 since Ms. Coggin didn’t pay the liability as required before filing a refund claim for those years. Since, the district court didn’t have (nor did it claim to have) refund jurisdiction for these two years, the Tax Court had jurisdiction over Ms. Coggin’s innocent spouse claim with respect to years 2008 and 2009.

To continue your research on Tax Court jurisdiction to review innocent spouse relief, see FTC 2d/FIN ¶U-2148.


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