This article delves into the recent Tax Court Memorandum decision in Joanne Salvi Vanover v. Commissioner, T.C. Memo. 2025-37, offering insights for tax practitioners on the nuances of Innocent Spouse Relief under Internal Revenue Code (IRC) § 6015. The case provides a comprehensive analysis of the statutory requirements and the factors considered by the Tax Court when evaluating a taxpayer’s claim for relief from joint and several liability.

Factual Background

Joanne Salvi Vanover (Ms. Salvi) sought relief from joint and several liability for federal income tax obligations arising from joint returns filed with her former spouse, Michael D. Vanover (Mr. Vanover), for the 2017 and 2018 taxable years. For 2017, Ms. Salvi sought relief under § 6015(f) from an underpayment of tax shown as due on the joint return. For 2018, she sought relief under § 6015(b), (c), or (f) from a deficiency attributable to unreported income and under § 6015(f) from an underpayment shown as due.

The couple married in 2015 and divorced in 2023. During their marriage, they maintained separate and joint bank accounts, with Ms. Salvi primarily responsible for bill payments. Both individuals had pre-existing financial issues. Joint income tax returns were filed for 2015 through 2018, often with Ms. Salvi taking the lead in obtaining necessary information from Mr. Vanover. Notably, the 2015 joint return had an unpaid balance, leading to an installment agreement with the IRS in 2017, during which Ms. Salvi began to suspect Mr. Vanover’s significant past-due tax liabilities.

The 2017 joint return reported adjusted gross income of $155,623 with a balance due of $2,291, which was not paid. For 2018, the initially prepared return failed to include some of Mr. Vanover’s income. A revised joint return was filed showing a tax due of $21,551, which also went unpaid. The IRS subsequently issued a Notice of Deficiency for 2018, determining a deficiency of $2,233 due to unreported nonemployee compensation of $850 for Mr. Vanover, unreported dividends of $1,001 and capital gains of $4,823 for Ms. Salvi, and additional tax of $396 on an early retirement plan distribution attributable to Mr. Vanover.

Taxpayer’s Request for Relief

Ms. Salvi filed Form 8857, Request for Innocent Spouse Relief, seeking relief for the 2015 through 2018 tax years. She claimed unawareness of Mr. Vanover’s prior tax debts, difficulties in obtaining his tax information, and a lack of knowledge about inaccuracies on the returns. She also alleged spousal abuse and financial control by Mr. Vanover. The IRS initially denied her request. Ms. Salvi then filed a petition with the Tax Court.

Court’s Analysis of the Law

The Tax Court began by establishing its jurisdiction under § 6015(e). The court applied a de novo standard of review, considering the administrative record and any newly discovered or previously unavailable evidence, including the testimony of Ms. Salvi and Mr. Vanover. The requesting spouse bears the burden of proving entitlement to relief.

The court then addressed the fundamental requirement that a joint return must have been filed for relief under § 6015(b), (c), and (f) to be available. Despite Ms. Salvi’s initial contention regarding the 2018 return, the court found that the parties’ stipulations that they "elected to file a joint personal income tax return as a married couple" for 2018 and that a Form 1040 was "e-filed on behalf of Petitioner and Intervenor" were conclusive admissions under Tax Court Rule 91(e). The court cited McGivney v. Commissioner, T.C. Memo. 2000-224, for the principle that stipulations bind the parties to their terms.

Application of Law to Facts and Conclusions

The court analyzed each avenue of relief sought by Ms. Salvi:

Section 6015(b) Relief (Full Relief for Understatement): To qualify for relief under § 6015(b), the requesting spouse must prove, among other things, that they did not know and had no reason to know of the understatement at the time of signing the return and that the understatement was attributable to erroneous items of the nonrequesting spouse [§ 6015(b)(1)]. The court found that while there was an understatement for 2018 and a portion was attributable to Mr. Vanover, Ms. Salvi had "reason to know" of the understatement attributable to Mr. Vanover. The court reasoned that a reasonably prudent person in Ms. Salvi’s circumstances, aware of Mr. Vanover’s financial difficulties since at least 2017 and the prior unpaid tax liability for 2015, would have had a "heightened duty to inquire" about the accuracy of the 2018 return. The court cited Price v. Commissioner, 887 F.2d 959, 963 n.9, 965 (9th Cir. 1989), for the duty of inquiry. Furthermore, because Mr. Vanover’s retirement account distribution was reported on the return, the court concluded Ms. Salvi had reason to know of the unreported § 72(t) additional tax, citing Porter v. Commissioner, 132 T.C. 203, 212 (2009). Consequently, relief under § 6015(b) was denied.
Section 6015(c) Relief (Proportionate Relief for Understatement): Section 6015(c) allows a separated or divorced spouse to be liable only for the portion of the deficiency allocable to them, unless they had actual knowledge of the item giving rise to the deficiency [§ 6015(c)(1), (3)]. The court found that Ms. Salvi met the requirements of filing a joint return and being separated from Mr. Vanover. While a portion of the 2018 deficiency was attributable to Ms. Salvi’s income, the court agreed with the Commissioner that Ms. Salvi was eligible for relief under § 6015(c) for the portion of the deficiency attributable to Mr. Vanover’s unreported nonemployee compensation and the related § 72(t) tax because there was no evidence she had actual knowledge of these items. The court highlighted Treasury Regulation § 1.6015-3(c)(4) (example 2), which clarifies that actual knowledge is not inferred from reason to know in the context of § 6015(c). Thus, partial relief was granted under § 6015(c).
Section 6015(f) Relief (Equitable Relief for Understatement or Underpayment): Section 6015(f) provides a safety net for taxpayers who do not qualify for relief under § 6015(b) or (c), offering relief if it is inequitable to hold the requesting spouse liable after considering all facts and circumstances [§ 6015(f)(1)(A)]. The court applied the three-step analysis outlined in Revenue Procedure 2013-34.
- Threshold Requirements: The court found that Ms. Salvi met the seven threshold requirements of Revenue Procedure 2013-34, § 4.01, except for the attribution requirement for the underpayment in 2017 and a portion of the underpayment in 2018, which the respondent argued were attributable to Ms. Salvi’s insufficient withholding. However, the court noted that even assuming the underpayments were attributable to Mr. Vanover, equitable relief would still be denied based on other factors.
- Streamlined Determination: The streamlined determination requires meeting three conditions, including economic hardship if relief is not granted. The court found that Ms. Salvi would not suffer economic hardship based on her current income of approximately $85,000 per year, exceeding 250% of the federal poverty guidelines. Therefore, streamlined relief was not available.
- Full Equitable Relief Analysis: The court considered the nonexclusive factors in Revenue Procedure 2013-34, § 4.03(2):
  - Marital Status: Divorced, favors relief.
  - Economic Hardship: Neutral, as not established.
  - Lack of Knowledge: Weighs against relief. The court found Ms. Salvi had reason to know the tax reported on the returns would not be paid, given Mr. Vanover’s prior financial issues and the unpaid 2015 liability. The court did not find sufficient evidence of financial control or abuse by Mr. Vanover to negate this knowledge. The court cited Thomassen v. Commissioner, T.C. Memo. 2011-88, for the requirement of specificity regarding allegations of abuse.
  - Legal Obligation: Neutral, as the divorce decree’s division of tax liabilities was subject to Tax Court modification.
  - No Significant Benefit: Favors relief, as payments made were considered normal support. The court cited Pullins v. Commissioner, 136 T.C. 432, 452 (2011), regarding mortgage payments as normal support.
  - Compliance: Weighs against relief due to Ms. Salvi’s varied tax compliance since separation, including a yet-to-be-filed 2022 return.
  - Mental or Physical Health: Neutral, as Ms. Salvi’s claims of mental duress were raised late and unsupported by the record.

Considering these factors, the court concluded that it was not inequitable to hold Ms. Salvi liable for the underpayment amounts for the taxable years at issue, thus denying relief under § 6015(f).

Conclusion

Salvi v. Commissioner serves as a valuable reminder for tax practitioners advising clients seeking innocent spouse relief. The case underscores the importance of:

Understanding the distinct standards for "reason to know" under § 6015(b) and "actual knowledge" under § 6015(c).
Thoroughly documenting the taxpayer’s knowledge of the spouse’s financial situation and the items giving rise to the tax liability.
Gathering concrete evidence to support claims of economic hardship, abuse, or financial control.
Ensuring the taxpayer’s subsequent compliance with tax laws, as this is a significant factor in the equitable relief analysis.
Recognizing the binding nature of stipulations made before the Tax Court.

While partial relief was granted under § 6015(c) in this case due to the lack of actual knowledge of specific income items attributable to the nonrequesting spouse, the denial of relief under § 6015(b) and (f) highlights the stringent requirements and the comprehensive factual analysis undertaken by the Tax Court in these matters. Practitioners must carefully assess each client’s unique circumstances and navigate the complex provisions of § 6015 to provide effective representation.

Prepared with assistance from NotebookLM.