CALIFORNIA FAMILY LAW
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Income Tax Matters
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Tax Returns/Rates
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Innocent Spouse Rule-Jt. Return
............Relief Granted
11 Cards On This Topic:
Where W could demonstrate innocence as to a portion of H's substantial tax understatement, apportionment under innocent spouse statute appropriate.
W had reason to know of substantial understatement of tax from multiple sources; factors considered in determining reasonableness.
Negative income does not, as matter of law, put reasonable person on notice that reported income has been understated; focus is on extent family expenditures exceed reported income.
W held to be innocent spouse despite her actual knowledge of erroneous deductions. Test stated.
Mere knowledge of existence of deduction, which happens to be erroneous, does not bar innocent spouse relief; standards for omission and erroneous deduction relief different.
Standard to determine if taxpayer had "reason to know" of substantial understatement.
As W2 satisfied safe harbor conditions in Rev. Proc. 2000-15, sec. 4.02, determination that she did not qualify for innocent spouse relief per IRC 6015(f) was abuse of discretion.
Although W qualifies as innocent spouse for income she did not know about, she does not for income that passed through her hands.
Where parties have very high std of living and amt of understatement relatively small, such that W would not have noticed, innocent spouse criteria satisfied; in determined equities, court may consider future hardship on applying spouse.
W held not to be on notice nor to have benefited when H's misappropriated funds merely maintained their normal lifestyle; parties still married.
Tests to determine if reasonably prudent person could be expected to know of omission.