Tax Court in Brief | Pocock v. Commissioner | Equitable Innocent Spouse Relief Under 6015(f)

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The Tax Court in Brief – June 6th – June 10th, 2022

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Tax Litigation:  The Week of June 6th, 2022, through June 10th, 2022

Pocock v. Commissioner, T.C. Memo. 2022-55 | June 6, 2022 | Vasquez, J.| Dkt. No. 12558-17 Consolidated with Dkt. No. 23569-17L

Opinion

Summary: Jan Pocock (Jan), a 1972 college graduate, married Douglas Pocock (Douglas), a Vietnam war veteran, in 1973. They had 2 children. Douglas had a history of aggressive behavior towards Jan and the children, especially about financial matters. In 1990, Jan and Douglas separated but they reconnected in 1992. In 1999, Jan, her ailing and elderly mother, and Douglas financed the purchase and closing costs for a home they could all live in. Title to the home was in all three of their names. Douglas maintained control over his and Jan’s mail, such so that he installed an electric contraption at the house that rang whenever someone opened the mailbox, and he always retrieved the mail immediately upon delivery. Douglas alone prepared his and Jan’s joint income tax returns. Jan did not review or sign the returns, and, considering her upbringing, she was accustomed to relying on Douglas to prepare the returns.

In 1995-2005, Douglas fraudulently claimed and through those years received near $1,000,000 in refunds by overstating his income and tax withholdings. Believing refund checks were from Douglas’s money brokering activities, Jan endorsed some of the refund checks, and Douglas signed Jan’s name to some of them. The refunds were the primary source of income for Douglas and Jan, and Jan knew Douglas paid for all of their expenses through the accounts in which the refund amounts were deposited. In 2005, Douglas’s mother died, and he, as executor, misappropriated funds from her estate. Upon Jan and her mother’s discovery of Douglas’s actions, he was removed from the deed to the home that they jointly purchased, and he wrote Jan a check for $140,000. She deposited the check into a bank account from which she removed Douglas as joint owner.

For the tax years in issue, 2006-2008, Douglas continued his fraudulent scheme. But, the IRS did not issue a refund check for 2008. When that check did not materialize, Douglas contacted the IRS for help and an examination of the joint returns for all three years ensued, which resulted in credit reversals and about $500,000 of liabilities owed to the IRS. In October 2010, Jan learned of the situation. She asked Douglas about it and he responded by slamming her against a wall. In 2011, Douglas was diagnosed with post-traumatic stress disorder, and later that year, Douglas and Jan divorced, although he was permitted to reside with her, albeit with payment of rent and in a separate part of the house. Also in 2011, an IRS criminal investigation ensued in 2011, which paused Jan and Douglas’s pending collection due process proceeding.

In 2013, Jan filed Form 8857, Request for Innocent Spouse Relief, for tax years 2006-2008. In 2015, the U.S. attorney’s office ultimately declined criminal prosecution, and also in that year, Jan’s mother died. In 2016, the IRS denied her request for innocent spouse relief, concluding she had reason to know of Douglas’s fraudulent tax scheme. In 2017, the IRS issued a Notice of Determination Concerning Collection Actions Under Section 6630 and Your Request for Relief from Joint and Several Liability under Section 6015. Jan petitioned the Tax Court to review those determinations. Before trial, she completed and submitted Form 433-A, Collection information Statement for Wage Earners and Self-Employed Individuals.

Key Issues:

Primary Holdings:

Key Points of Law:

Insights:  Pocock is an example of how a taxpayer’s entire life story may be relevant to a determination of innocent spouse relief under section 6015(f) of the Code. The fact-pattern in issue spanned from 1972 through 2017. In laying the factual foundation for the tax analysis, the Court noted Jan’s education in the 1970s, Douglas’s military service in the Vietnam War, the birth of children to their marriage, the cohabitation and death of Jan’s mother, Douglas’s mental challenges, and other personal attributes, picadilloes, and tendencies of Jan and Douglas with respect to finances, tax matters, control, and demeanor over the course of decades, all of which were relevant to the Tax Court’s evaluation of the many requirements for a taxpayer to receive innocent spouse relief under 26 U.S.C. § 6015.

For additional Tax Court in Brief Innocent Spouse Relief information, please search “Innocent Spouse” in our Insights blog to find the following case summaries and many other resources on this topic:

Podlucky v. Commissioner – $34M Jewelry in a Secret Room, Constructive Receipt, Innocent Spouse, and Putative Monks

DelPonte v. Commissioner – Innocent Spouse Relief and Authority of the IRS Chief Counsel

Actions (and Inactions) Matter with Innocent Spouse Relief – Jones v. Commissioner