§66 — Treatment of community income
108 citing cases
Statute Text — 26 U.S.C. §66
If—
2 individuals are married to each other at any time during a calendar year;
such individuals—
live apart at all times during the calendar year, and
do not file a joint return under section 6013 with each other for a taxable year beginning or ending in the calendar year;
one or both of such individuals have earned income for the calendar year which is community income; and
no portion of such earned income is transferred (directly or indirectly) between such individuals before the close of the calendar year,
then, for purposes of this title, any community income of such individuals for the calendar year shall be treated in accordance with the rules provided by section 879(a).
The Secretary may disallow the benefits of any community property law to any taxpayer with respect to any income if such taxpayer acted as if solely entitled to such income and failed to notify the taxpayer’s spouse before the due date (including extensions) for filing the return for the taxable year in which the income was derived of the nature and amount of such income.
Under regulations prescribed by the Secretary, if—
an individual does not file a joint return for any taxable year,
such individual does not include in gross income for such taxable year an item of community income properly includible therein which, in accordance with the rules contained in section 879(a), would be treated as the income of the other spouse,
the individual establishes that he or she did not know of, and had no reason to know of, such item of community income, and
taking into account all facts and circumstances, it is inequitable to include such item of community income in such individual’s gross income,
then, for purposes of this title, such item of community income shall be included in the gross income of the other spouse (and not in the gross income of the individual). Under procedures prescribed by the Secretary, if, taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion of either) attributable to any item for which relief is not available under the preceding sentence, the Secretary may relieve such individual of such liability.
For purposes of this section—
The term “earned income” has the meaning given to such term by section 911(d)(2).
The term “community income” means income which, under applicable community property laws, is treated as community income.
The term “community property laws” means the community property laws of a State, a foreign country, or a possession of the United States.
Treasury Regulations
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Treas. Reg. §1.66-1Treatment of community income
(a) In general. Married individuals domiciled in a community property state who do not elect to file a joint individual Federal income tax return under section 6013 generally must report half of the total community income earned by the spouses during the taxable year except at times when one of the following exceptions applies:
(1) The spouses live apart and meet the qualifications of § 1.66-2.
(2) The Secretary denies a spouse the Federal income tax benefits resulting from community property law under § 1.66-3, because that spouse acted as if solely entitled to the income and failed to notify his or her spouse of the nature and amount of the income prior to the due date for the filing of his or her spouse's return.
(3) A requesting spouse qualifies for traditional relief from the Federal income tax liability resulting from the operation of community property law under § 1.66-4(a).
(4) A requesting spouse qualifies for equitable relief from the Federal income tax liability resulting from the operation of community property law under § 1.66-4(b).
(b) Applicability. (1) The rules of this section apply only to community income, as defined by state law. The rules of this section do not apply to income that is not community income. Thus, the rules of this section do not apply to income from property that was formerly community property, but in accordance with state law, has ceased to be community property, becoming, e.g., separate property or property held by joint tenancy or tenancy in common.
(2) When taxpayers report income under paragraph (a) of this section, all community income for the calendar year is treated in accordance with the rules provided by section 879(a). Unlike the other provisions under section 66, section 66(a) does not permit inclusion on an item-by-item basis.
(c) Transferee liability. The provisions of section 66 do not negate liability that arises under the operation of other laws. Therefore, a spouse who is not subject to Federal income tax on community income may nevertheless remain liable for the unpaid tax (including additions to tax, penalties, and interest) to the extent provided by Federal or state transferee liability or property laws (other than community property laws). For the rules regarding the liability of transferees, see sections 6901 through 6904 and the regulations thereunder.
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Treas. Reg. §1.66-1(a)In general.
In general. Married individuals domiciled in a community property state who do not elect to file a joint individual Federal income tax return under section 6013 generally must report half of the total community income earned by the spouses during the taxable year except at times when one of the following exceptions applies:
(1) The spouses live apart and meet the qualifications of § 1.66-2.
(2) The Secretary denies a spouse the Federal income tax benefits resulting from community property law under § 1.66-3, because that spouse acted as if solely entitled to the income and failed to notify his or her spouse of the nature and amount of the income prior to the due date for the filing of his or her spouse's return.
(3) A requesting spouse qualifies for traditional relief from the Federal income tax liability resulting from the operation of community property law under § 1.66-4(a).
(4) A requesting spouse qualifies for equitable relief from the Federal income tax liability resulting from the operation of community property law under § 1.66-4(b).
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Treas. Reg. §1.66-1(b)Applicability.
Applicability. (1) The rules of this section apply only to community income, as defined by state law. The rules of this section do not apply to income that is not community income. Thus, the rules of this section do not apply to income from property that was formerly community property, but in accordance with state law, has ceased to be community property, becoming, e.g., separate property or property held by joint tenancy or tenancy in common.
(2) When taxpayers report income under paragraph (a) of this section, all community income for the calendar year is treated in accordance with the rules provided by section 879(a). Unlike the other provisions under section 66, section 66(a) does not permit inclusion on an item-by-item basis.
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Treas. Reg. §1.66-1(c)Transferee liability.
Transferee liability. The provisions of section 66 do not negate liability that arises under the operation of other laws. Therefore, a spouse who is not subject to Federal income tax on community income may nevertheless remain liable for the unpaid tax (including additions to tax, penalties, and interest) to the extent provided by Federal or state transferee liability or property laws (other than community property laws). For the rules regarding the liability of transferees, see sections 6901 through 6904 and the regulations thereunder.
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Treas. Reg. §1.66-2Treatment of community income where spouses live apart
(a) Community income of spouses domiciled in a community property state will be treated in accordance with the rules provided by section 879(a) if all of the following requirements are satisfied—
(1) The spouses are married to each other at any time during the calendar year;
(2) The spouses live apart at all times during the calendar year;
(3) The spouses do not file a joint return with each other for a taxable year beginning or ending in the calendar year;
(4) One or both spouses have earned income that is community income for the calendar year; and
(5) No portion of such earned income is transferred (directly or indirectly) between such spouses before the close of the calendar year.
(b) Living apart. For purposes of this section, living apart requires that spouses maintain separate residences. Spouses who maintain separate residences due to temporary absences are not considered to be living apart. Spouses who are not members of the same household under § 1.6015-3(b) are considered to be living apart for purposes of this section.
(c) Transferred income. For purposes of this section, transferred income does not include a de minimis amount of earned income that is transferred between the spouses. In addition, any amount of earned income transferred for the benefit of the spouses' child will not be treated as an indirect transfer to one spouse. Additionally, income transferred between spouses is presumed to be a transfer of earned income. This presumption is rebuttable.
(d) Examples. The following examples illustrate the rules of this section:
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Treas. Reg. §1.66-2(a)§1.66-2(a)
Community income of spouses domiciled in a community property state will be treated in accordance with the rules provided by section 879(a) if all of the following requirements are satisfied—
(1) The spouses are married to each other at any time during the calendar year;
(2) The spouses live apart at all times during the calendar year;
(3) The spouses do not file a joint return with each other for a taxable year beginning or ending in the calendar year;
(4) One or both spouses have earned income that is community income for the calendar year; and
(5) No portion of such earned income is transferred (directly or indirectly) between such spouses before the close of the calendar year.
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Treas. Reg. §1.66-2(b)Living apart.
Living apart. For purposes of this section, living apart requires that spouses maintain separate residences. Spouses who maintain separate residences due to temporary absences are not considered to be living apart. Spouses who are not members of the same household under § 1.6015-3(b) are considered to be living apart for purposes of this section.
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Treas. Reg. §1.66-2(c)Transferred income.
Transferred income. For purposes of this section, transferred income does not include a de minimis amount of earned income that is transferred between the spouses. In addition, any amount of earned income transferred for the benefit of the spouses' child will not be treated as an indirect transfer to one spouse. Additionally, income transferred between spouses is presumed to be a transfer of earned income. This presumption is rebuttable.
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Treas. Reg. §1.66-2(d)Examples.
Examples. The following examples illustrate the rules of this section:
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Treas. Reg. §1.66-3Denial of the Federal income tax benefits resulting from the operation of community property law where spouse not notified
(a) In general. The Secretary may deny the Federal income tax benefits of community property law to any spouse with respect to any item of community income if that spouse acted as if solely entitled to the income and failed to notify his or her spouse of the nature and amount of the income before the due date (including extensions) for the filing of the return of his or her spouse for the taxable year in which the item of income was derived. Whether a spouse has acted as if solely entitled to the item of income is a facts and circumstances determination. This determination focuses on whether the spouse used, or made available, the item of income for the benefit of the marital community.
(b) Effect. The item of community income will be included, in its entirety, in the gross income of the spouse to whom the Secretary denied the Federal income tax benefits resulting from community property law. The tax liability arising from the inclusion of the item of community income must be assessed in accordance with section 6212 against this spouse.
(c) Examples. The following examples illustrate the rules of this section:
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Treas. Reg. §1.66-3(a)In general.
In general. The Secretary may deny the Federal income tax benefits of community property law to any spouse with respect to any item of community income if that spouse acted as if solely entitled to the income and failed to notify his or her spouse of the nature and amount of the income before the due date (including extensions) for the filing of the return of his or her spouse for the taxable year in which the item of income was derived. Whether a spouse has acted as if solely entitled to the item of income is a facts and circumstances determination. This determination focuses on whether the spouse used, or made available, the item of income for the benefit of the marital community.
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Treas. Reg. §1.66-3(b)Effect.
Effect. The item of community income will be included, in its entirety, in the gross income of the spouse to whom the Secretary denied the Federal income tax benefits resulting from community property law. The tax liability arising from the inclusion of the item of community income must be assessed in accordance with section 6212 against this spouse.
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Treas. Reg. §1.66-3(c)Examples.
Examples. The following examples illustrate the rules of this section:
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Treas. Reg. §1.66-4Request for relief from the Federal income tax liability resulting from the operation of community property law
(a) Traditional relief—(1) In general. A requesting spouse will receive relief from the Federal income tax liability resulting from the operation of community property law for an item of community income if—
(i) The requesting spouse did not file a joint Federal income tax return for the taxable year for which he or she seeks relief;
(ii) The requesting spouse did not include in gross income for the taxable year an item of community income properly includible therein, which, under the rules contained in section 879(a), would be treated as the income of the nonrequesting spouse;
(iii) The requesting spouse establishes that he or she did not know of, and had no reason to know of, the item of community income; and
(iv) Taking into account all of the facts and circumstances, it is inequitable to include the item of community income in the requesting spouse's individual gross income.
(2) Knowledge or reason to know. (i) A requesting spouse had knowledge or reason to know of an item of community income if he or she either actually knew of the item of community income, or if a reasonable person in similar circumstances would have known of the item of community income. All of the facts and circumstances are considered in determining whether a requesting spouse had reason to know of an item of community income. The relevant facts and circumstances include, but are not limited to, the nature of the item of community income, the amount of the item of community income relative to other income items, the couple's financial situation, the requesting spouse's educational background and business experience, and whether the item of community income was reflected on prior years' returns (e.g., investment income omitted that was regularly reported on prior years' returns).
(ii) If the requesting spouse is aware of the source of community income or the income-producing activity, but is unaware of the specific amount of the nonrequesting spouse's community income, the requesting spouse is considered to have knowledge or reason to know of the item of community income. The requesting spouse's lack of knowledge of the specific amount of community income does not provide a basis for relief under this section.
(3) Inequitable. All of the facts and circumstances are considered in determining whether it is inequitable to hold a requesting spouse liable for a deficiency attributable to an item of community income. One relevant factor for this purpose is whether the requesting spouse benefitted, directly or indirectly, from the omitted item of community income. A benefit includes normal support, but does not include de minimis amounts. Evidence of direct or indirect benefit may consist of transfers of property or rights to property, including transfers received several years after the filing of the return. Thus, for example, if a requesting spouse receives from the nonrequesting spouse property (including life insurance proceeds) that is traceable to items of community income attributable to the nonrequesting spouse, the requesting spouse will have benefitted from those items of community income. Other factors may include, if the situation warrants, desertion, divorce or separation. Factors relevant to whether it would be inequitable to hold a requesting spouse liable, more specifically described under the applicable administrative procedure issued under section 66(c) (Revenue Procedure 2000-15 (2000-1 C.B. 447) (See § 601.601(d)(2) of this chapter), or other applicable guidance published by the Secretary), are to be considered in making a determination under this paragraph.
(b) Equitable relief. Equitable relief may be available when the four requirements of paragraph (a)(1) of this section are not satisfied, but it would be inequitable to hold the requesting spouse liable for the unpaid tax or deficiency. Factors relevant to whether it would be inequitable to hold a requesting spouse liable, more specifically described under the applicable administrative procedure issued under section 66(c) (Revenue Procedure 2000-15 (2000-1 C.B. 447), or other applicable guidance published by the Secretary), are to be considered in making a determination under this paragraph.
(c) Applicability. Traditional relief under paragraph (a) of this section applies only to deficiencies arising out of items of omitted income. Equitable relief under paragraph (b) of this section applies to any deficiency or any unpaid tax (or any portion of either). Equitable relief is available only for the portion of liabilities that were unpaid as of July 22, 1998, and for liabilities that arise after July 22, 1998.
(d) Effect of relief. When the requesting spouse qualifies for relief under paragraph (a) or (b) of this section, the IRS must assess any deficiency of the nonrequesting spouse arising from the granting of relief to the requesting spouse in accordance with section 6212.
(e) Examples. The following examples illustrate the rules of this section:
(f) Fraudulent scheme. If the Secretary establishes that a spouse transferred assets to his or her spouse as part of a fraudulent scheme, relief is not available under this section. For purposes of this section, a fraudulent scheme includes a scheme to defraud the Secretary or another third party, such as a creditor, ex-spouse, or business partner.
(g) Definitions—(1) Requesting spouse. A requesting spouse is an individual who does not file a joint Federal income tax return with the nonrequesting spouse for the taxable year in question, and who requests relief from the Federal income tax liability resulting from the operation of community property law under this section for the portion of the liability arising from his or her share of community income for such taxable year.
(2) Nonrequesting spouse. A nonrequesting spouse is the individual to whom the requesting spouse was married and whose income or deduction gave rise to the tax liability from which the requesting spouse seeks relief in whole or in part.
(h) Effect of prior closing agreement or offer in compromise. A requesting spouse is not entitled to relief from the Federal income tax liability resulting from the operation of community property law under section 66 for any taxable year for which the requesting spouse has entered into a closing agreement (other than an agreement pursuant to section 6224(c) relating to partnership items) with the Secretary that disposes of the same liability that is the subject of the request for relief. In addition, a requesting spouse is not entitled to relief from the Federal income tax liability resulting from the operation of community property law under section 66 for any taxable year for which the requesting spouse has entered into an offer in compromise with the Secretary. For rules relating to the effect of closing agreements and offers in compromise, see sections 7121 and 7122, and the regulations thereunder.
(i) [Reserved]
(j) Time and manner for requesting relief—(1) Requesting relief. To request relief from the Federal income tax liability resulting from the operation of community property law under this section, a requesting spouse must file, within the time period prescribed in paragraph (j)(2) of this section, Form 8857, “Request for Innocent Spouse Relief” (or other specified form), or other written request, signed under penalties of perjury, stating why relief is appropriate. The requesting spouse must include the nonrequesting spouse's name and taxpayer identification number in the written request. The requesting spouse must also comply with the Secretary's reasonable requests for information that will assist the Secretary in identifying and locating the nonrequesting spouse.
(2) Time period for filing a request for relief—(i) Traditional relief. The earliest time for submitting a request for relief from the Federal income tax liability resulting from the operation of community property law under paragraph (a) of this section, for an amount underreported on, or omitted from, the requesting spouse's separate return, is the date the requesting spouse receives notification of an audit or a letter or notice from the IRS stating that there may be an outstanding liability with regard to that year (as described in paragraph (j)(2)(iii) of this section). The latest time for requesting relief under paragraph (a) of this section is 6 months before the expiration of the period of limitations on assessment, including extensions, against the nonrequesting spouse for the taxable year that is the subject of the request for relief, unless the examination of the requesting spouse's return commences during that 6-month period. If the examination of the requesting spouse's return commences during that 6-month period, the latest time for requesting relief under paragraph (a) of this section is 30 days after the commencement of the examination.
(ii) Equitable relief. The earliest time for submitting a request for relief from the Federal income tax liability resulting from the operation of community property law under paragraph (b) of this section is the date the requesting spouse receives notification of an audit or a letter or notice from the IRS stating that there may be an outstanding liability with regard to that year (as described in paragraph (j)(2)(iii) of this section). A request for equitable relief from the Federal income tax liability resulting from the operation of community property law under paragraph (b) of this section for a liability that is properly reported but unpaid is properly submitted with the requesting spouse's individual Federal income tax return, or after the requesting spouse's individual Federal income tax return is filed.
(iii) Premature requests for relief. The Secretary will not consider a premature request for relief under this section. The notices or letters referenced in this paragraph (j)(2) do not include notices issued pursuant to section 6223 relating to TEFRA partnership proceedings. These notices or letters include notices of computational adjustment to a partner or partner's spouse (Notice of Income Tax Examination Changes) that reflect a computation of the liability attributable to partnership items of the partner or the partner's spouse.
(k) Nonrequesting spouse's notice and opportunity to participate in administrative proceedings—(1) In general. When the Secretary receives a request for relief from the Federal income tax liability resulting from the operation of community property law under this section, the Secretary must send a notice to the nonrequesting spouse's last known address that informs the nonrequesting spouse of the requesting spouse's request for relief. The notice must provide the nonrequesting spouse with an opportunity to submit any information for consideration in determining whether to grant the requesting spouse relief from the Federal income tax liability resulting from the operation of community property law. The Secretary will share with each spouse the information submitted by the other spouse, unless the Secretary determines that the sharing of this information will impair tax administration.
(2) Information submitted. The Secretary will consider all of the information (as relevant to the particular relief provision) that the nonrequesting spouse submits in determining whether to grant relief from the Federal income tax liability resulting from the operation of community property law under this section.
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Treas. Reg. §1.66-4(a)Traditional relief—(1) In general.
Traditional relief—(1) In general. A requesting spouse will receive relief from the Federal income tax liability resulting from the operation of community property law for an item of community income if—
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Treas. Reg. §1.66-4(b)Equitable relief.
Equitable relief. Equitable relief may be available when the four requirements of paragraph (a)(1) of this section are not satisfied, but it would be inequitable to hold the requesting spouse liable for the unpaid tax or deficiency. Factors relevant to whether it would be inequitable to hold a requesting spouse liable, more specifically described under the applicable administrative procedure issued under section 66(c) (Revenue Procedure 2000-15 (2000-1 C.B. 447), or other applicable guidance published by the Secretary), are to be considered in making a determination under this paragraph.
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Treas. Reg. §1.66-4(c)Applicability.
Applicability. Traditional relief under paragraph (a) of this section applies only to deficiencies arising out of items of omitted income. Equitable relief under paragraph (b) of this section applies to any deficiency or any unpaid tax (or any portion of either). Equitable relief is available only for the portion of liabilities that were unpaid as of July 22, 1998, and for liabilities that arise after July 22, 1998.
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Treas. Reg. §1.66-4(d)Effect of relief.
Effect of relief. When the requesting spouse qualifies for relief under paragraph (a) or (b) of this section, the IRS must assess any deficiency of the nonrequesting spouse arising from the granting of relief to the requesting spouse in accordance with section 6212.
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Treas. Reg. §1.66-4(e)Examples.
Examples. The following examples illustrate the rules of this section:
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Treas. Reg. §1.66-4(f)Fraudulent scheme.
Fraudulent scheme. If the Secretary establishes that a spouse transferred assets to his or her spouse as part of a fraudulent scheme, relief is not available under this section. For purposes of this section, a fraudulent scheme includes a scheme to defraud the Secretary or another third party, such as a creditor, ex-spouse, or business partner.
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Treas. Reg. §1.66-4(g)Definitions—(1) Requesting spouse.
Definitions—(1) Requesting spouse. A requesting spouse is an individual who does not file a joint Federal income tax return with the nonrequesting spouse for the taxable year in question, and who requests relief from the Federal income tax liability resulting from the operation of community property law under this section for the portion of the liability arising from his or her share of community income for such taxable year.
(2) Nonrequesting spouse. A nonrequesting spouse is the individual to whom the requesting spouse was married and whose income or deduction gave rise to the tax liability from which the requesting spouse seeks relief in whole or in part.
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Treas. Reg. §1.66-4(h)Effect of prior closing agreement or offer in compromise.
Effect of prior closing agreement or offer in compromise. A requesting spouse is not entitled to relief from the Federal income tax liability resulting from the operation of community property law under section 66 for any taxable year for which the requesting spouse has entered into a closing agreement (other than an agreement pursuant to section 6224(c) relating to partnership items) with the Secretary that disposes of the same liability that is the subject of the request for relief. In addition, a requesting spouse is not entitled to relief from the Federal income tax liability resulting from the operation of community property law under section 66 for any taxable year for which the requesting spouse has entered into an offer in compromise with the Secretary. For rules relating to the effect of closing agreements and offers in compromise, see sections 7121 and 7122, and the regulations thereunder.
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Treas. Reg. §1.66-4(i)§1.66-4(i)
[Reserved]
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Treas. Reg. §1.66-4(j)Time and manner for requesting relief—(1) Requesting relief.
Time and manner for requesting relief—(1) Requesting relief. To request relief from the Federal income tax liability resulting from the operation of community property law under this section, a requesting spouse must file, within the time period prescribed in paragraph (j)(2) of this section, Form 8857, “Request for Innocent Spouse Relief” (or other specified form), or other written request, signed under penalties of perjury, stating why relief is appropriate. The requesting spouse must include the nonrequesting spouse's name and taxpayer identification number in the written request. The requesting spouse must also comply with the Secretary's reasonable requests for information that will assist the Secretary in identifying and locating the nonrequesting spouse.
(2) Time period for filing a request for relief—(i) Traditional relief. The earliest time for submitting a request for relief from the Federal income tax liability resulting from the operation of community property law under paragraph (a) of this section, for an amount underreported on, or omitted from, the requesting spouse's separate return, is the date the requesting spouse receives notification of an audit or a letter or notice from the IRS stating that there may be an outstanding liability with regard to that year (as described in paragraph (j)(2)(iii) of this section). The latest time for requesting relief under paragraph (a) of this section is 6 months before the expiration of the period of limitations on assessment, including extensions, against the nonrequesting spouse for the taxable year that is the subject of the request for relief, unless the examination of the requesting spouse's return commences during that 6-month period. If the examination of the requesting spouse's return commences during that 6-month period, the latest time for requesting relief under paragraph (a) of this section is 30 days after the commencement of the examination.
(ii) Equitable relief. The earliest time for submitting a request for relief from the Federal income tax liability resulting from the operation of community property law under paragraph (b) of this section is the date the requesting spouse receives notification of an audit or a letter or notice from the IRS stating that there may be an outstanding liability with regard to that year (as described in paragraph (j)(2)(iii) of this section). A request for equitable relief from the Federal income tax liability resulting from the operation of community property law under paragraph (b) of this section for a liability that is properly reported but unpaid is properly submitted with the requesting spouse's individual Federal income tax return, or after the requesting spouse's individual Federal income tax return is filed.
(iii) Premature requests for relief. The Secretary will not consider a premature request for relief under this section. The notices or letters referenced in this paragraph (j)(2) do not include notices issued pursuant to section 6223 relating to TEFRA partnership proceedings. These notices or letters include notices of computational adjustment to a partner or partner's spouse (Notice of Income Tax Examination Changes) that reflect a computation of the liability attributable to partnership items of the partner or the partner's spouse.
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Treas. Reg. §1.66-4(k)Nonrequesting spouse's notice and opportunity to participate in administrative proceedings—(1) In general.
Nonrequesting spouse's notice and opportunity to participate in administrative proceedings—(1) In general. When the Secretary receives a request for relief from the Federal income tax liability resulting from the operation of community property law under this section, the Secretary must send a notice to the nonrequesting spouse's last known address that informs the nonrequesting spouse of the requesting spouse's request for relief. The notice must provide the nonrequesting spouse with an opportunity to submit any information for consideration in determining whether to grant the requesting spouse relief from the Federal income tax liability resulting from the operation of community property law. The Secretary will share with each spouse the information submitted by the other spouse, unless the Secretary determines that the sharing of this information will impair tax administration.
(2) Information submitted. The Secretary will consider all of the information (as relevant to the particular relief provision) that the nonrequesting spouse submits in determining whether to grant relief from the Federal income tax liability resulting from the operation of community property law under this section.
108 Citing Cases
6015(e)(1)(A), Butler was overruled by Porter v.
66-9-306 (West 2020) (conservation easement valid even ifno privity ofestate or contract or no benefit to any other land, and "[n]o conservation easement shall be held automatically extinguished because ofviolation ofits terms or frustration ofits purposes"). These state-law changes help make conservation easements perpetual, but the mix ofsta
We hold that petitioners are subject to substantive liability under TUFTA on the basis ofconstructive fraud because they received Snow Hill Road and a liquidating distribution from Holiday Bowl without giving reasonably equivalent value in exchange for the distributions.
We hold that petitioners are subject to substantive liability under TUFTA on the basis ofconstructive fraud because they received Snow Hill Road and a liquidating distribution from Holiday Bowl without giving reasonably equivalent value in exchange for the distributions.
We hold that petitioners are subject to substantive liability under TUFTA on the basis ofconstructive fraud because they received Snow Hill Road and a liquidating distribution from Holiday Bowl without giving reasonably equivalent value in exchange for the distributions.
We hold that petitioners are subject to substantive liability under TUFTA on the basis ofconstructive fraud because they received Snow Hill Road and a liquidating distribution from Holiday Bowl without giving reasonably equivalent value in exchange for the distributions.
1.6662-2(c), Income Tax Regs. The Commissioner bears the burden ofproduction regarding the taxpayer's liability for any penalty. Sec. 7491(c); see also Higbee v. Commissioner, 116 T.C. at 46-447. Once the Commissioner has met this burden, the taxpayermust provide persuasive evidence that the Commissioner's determination was incorrect. Se Rule 142(a); Higbee v. Commissioner, 116 T.C. at 447. Negligence includes any failure to make a reasonable attemptto comply with the provisions ofthe internal r
Federal Tax Law Treatment ofCommunityProperty Section 66 deals with the treatment ofcommunity income.
Federal Tax Law Treatment ofCommunityProperty Section 66 deals with the treatment ofcommunity income.
We hold that they are liable; (3) whether Dr.
Section 66!51(a)(1) Failure To File Addition to Tax for 2002 and 2003 As an alternative to section 6651(f), respondent contends that Dr. and Mrs. Alexander are liable for additions to tax pursuant to section 6651(a)(1) for 2002 and 2003. Section 6651(a)(1) provides for an addition toitax for failure to timely file a Federal income tax return (deter
According}y, we hold that petitioner is liable for the section 6651(f) fraudulent failure to file additions to tax.3° VII.
Hawk, Jr., GST Exempt Marital Trust, Nancy Sue Hawk and Regions Bank, cotrustees; and Nancy Sue Í4awk are each liable as transferees for the 2003 Federal income tax liability ofHoliday Bowl, Inc., of$965,358 and penalties pursuant to section 6662 b) and (h) of$8,035 and $370,072, respectively.
Hawk, Jr., GST Exempt Marital Trust, Nancy Sue Hawk and Regions Bank, cotrustees; and Nancy Sue Hawk are each liable as transferees for the 2003 Federal income tax liability ofHoliday Bowl, Inc., of$965,358 and penalties pursuant to section 6662(b) and (h) of$8,035 and $370,072, respectively.
In cases involving fraudulent conveyances, the burden of proofis on the creditor to establish fraud, and the creditor must show that the conveyance was made without fair consideration, leaving the grantor insolvent or made with actual intent to hinder, delay, or defraud creditors. Hicks v. Whiting, - 17 - 258 S.W. 784 (Tenn. 1924
The IRS assessed a trust fund r covery penalty agains petitioner for 2002 pursuant to section 6672.
Section 66.62(a) imposes a penalty equal to 20 percent of the amount of-any underpayment attributable to negligence or- disregard of rules or regulations. Sec.- 6662(b) (1). The term "negligence" includes any failure to make a reasonable attempt to comply with tax laws, and the term "disregard" includes any careless, reckless, or intentional disreg
Although the regulation cites § 66fí4 (c) (1) as an example of a partner-level defense, it do$s not foreclose a similar defense on behalf of the paËtnership; it only states that "whether the partner had met the criteria of * * * section 6664 (c) (1) " is a pa$tner-level defense.
Therefore, we hold that the 2006 return is not a joint return under.
Respondent also determined for 20iO5 an addition to tax for failure to file timely under section 66:51(a) (1) of $395.77 and an addition to tax for failure to pay timely under section 6651(a) (2) of $351.80.
The Appeals officer determined that petitioner was liable for the TFRPs, sent petitioner a determination letter to that effect, and assessed the TFRPs pursuant to section 6672.
Under section 66.62(d) (2) (B), any understatement for purposes of the penalty for a substantial understatement of income tax shall be reduced by that portion of the understatement which is attributable to "the tax treatment of any item by the taxpayer if there -is or was substantial authority for such treatment". Authority for this,purpose m.ay include
Because petiti ner failed to offer any evidence of reasonable cause and lack of willful neglect for his failure to file timely, respondent's determination that petitioner is liable for the addition^to tax under section 66 1(a) (1) is sustained.
of tax attributable to certain`i circumstances, including,:under:section 66.62(b)(2), a "substantial, understatement,of income tax ." Section 6664(a) defines an, .
to-the addition to tax',I:under,,;,: section 66.51 (a)(1), but also petitioners have.
16 , 2008 - 11 - penalty .under section 6662(a )-because of a substantial under- statement of-income tax (substantial understatement) under section 6662.(b) (2) for each of those years . Section 6662 (a),imposes an accuracy-.related penalty equal to 20 percent of the underpayment attributable to, .inter alia , substantial understatement under section 66.62(b)(2) . For pur- poses of section 6662.(b)(2),7an understatement is equal to the excess of the amount of tax-required to be shown in the tax
6662 (d) (1) (A) . The section 6662 accuracy-related penalty-does not apply where the taxpayer shows that he or she acted in good faith and exercised reasonable cause .
§§ 66'511or 6654 ." A trial was held in San Antonio,- Texas, on, February 25, 2009;'to determine whether petitioner is entitled to a refund of the alleged overpayment of $171,081.59 as, shown on his delinquent 2005 tax .return . OPINION At the trial and in his posttrial briefs and other filings petitioner traces the claimed payment of $281,083 .07 t
Petitioner filed his 2003 return (i .e ., which was due April 15, 2004) on September 25, 2006, and has failed to establish, pursuant to section 6651(a)(1), that the untimely filing was due to reasonable cause and not willful neglect .
6662(d) (1) (A).. - The section 6662 accuracy-related penalty does not apply where the taxpayer shows that he acted in good faith and with reasonable cause.
pursuant to section 6673(a)(2)(B) by ordering respondent to pay attorney's -1.1- fees of Kersting project petitioners to investigate and present the evidence of Sims's and McWade's misconduct to the Court .
Consequently, we hold that petitioner is liable for the addition to tax under section 6651(a)(1) , D.
We hold that he does .
For these reasons, we will grant respondent's motions for summary judgment as to the section 66 .63 penalties .
The section 66,51(a)(2) addition to tax is not imposed if the taxpayer proves that the failure to pay is due to reasonable cause and not willful neglect . Under section 6651(g) ( 2), a return prepabyrtehed S ecYre tarYy pursuant to section 6020(b) is treated as a:return filed by the taxpayer for the purpose of determining the amount of an addition to t
Section 66 provides for the treatment of "community income" in community property States when the spouses do not file jointly .
But they do point us to Revenue Procedure 2000-15, superseded by Revenue Procedure 2003-61 .
On February 2, 2009, respondent filed a motion for summary judgment seeking a decision that collection can proceed and to impose a penalty pursuant to section 6673 .
The accuracy-related penalty.applies,to any underpayment of tax required to be.shown(cid:127)on aireturn that -is attributable t negligence or disregard of rules or regulations under section 66,62 (b) (1) .
9 T .C. 191, 197 (2002) . Petitioner suggests that the Court "arguably rendered a different jurisdictional holding in Bernal v . Commissioner , 120 T.C. 102 (2003), where the Court dismissed for lack of jurisdiction a spouse's.claim for relief under section 66 . The rationale of that case is that Congress had not by statute 7 provided this Court with jurisdiction under section 66, in contrast to section 6015, where the grant of jurisdiction is explicit . See Bernal v . Commissioner, supra at 107
imposed sanctions against respondent by relieving petitioners of liability for (1) the interest component of the addition to tax for negligence under former section 66.53:(a), and (2) the incremental interest attributable to the increased rate prescribed .in former section 6621(c) .
imposed sanctions against respondent by relieving petitioners of liability for (1) the interest component of the addition to tax for negligence under former section 66.53:(a), and (2) the incremental interest attributable to the increased rate prescribed .in former section 6621(c) .
Section 66 provides for the treatment of “community income” in community property States when the spouses do not file jointly. This section, amended in 1984 by the Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 424(b), 98 Stat. 801, allocates the income between the spouses, and its subsection (c), embodying relief referred to as “traditional r
Responden 's determinations of accuracy-related penalties under section 66 2(a) for 2002, 2003, and 2004 are sustained.
Section 66.51(a)(1) imposes an addition to tax for failure to file a timely return unless the taxpayer proves that such failure is due to reasonable cause and not willful neglect .- See United States v . Boyle , 469 U .S . 241, 245 (1985) . Pursuant to section 7491(c), respondent has the burden of production with respect to this addition to tax and
Accordingly, we hold that petitioners .
section 6662 (a) on the same underpayment of tax upon which the Court found petitioner liable for the fraud penalty under section 6663(a) . - 87 - Section 6662 (a) does not apply to any portion of an underpayment subject to the fraud penalty under section 66 6 Sec . 6662(b) . When a joint return is filed and one spouse 4s 1 found liable for the fraud penalty, imposing the accuracy-r~late d penalty on the other spouse with respect to the same underpaymen t would result in impermissible stacking .
Accuracy-Related Penalty The last issue for decision is whether petitioner is liable for an accuracy-related penalty pursuant to section 6662(a) for the 2002 taxable year .
Section 66(c) provides a taxpayer with relief .if certain circumstances are satisfied. Petitioner is not eligible for the type of relief provided by section 66(a) or (b) . Section 66(a) does not apply because petitioner and Dr .
Wright is found not to be liable for the civil fraud penalty pursuant to section 66 .63 on any portion of the underpayment for any of the years in issue, petitioners are liable for the accuracy-related penalty, pursuant to section 6662, on such portion of the underpayment .
-5- for 2001 and 2002, and therefore was liable for increased deficiencies, increased penalties under sec ion 6663, and increased additions to tax under section 66 1(a) (1) .5 On November 15, 2006, trial was held in San Fr ncisco, California.
ence of the taxpayer, and the reliance on the advice of a professional, such as an acco ntant . Sec . 1 .6664-4(b)(1), Income Tax Regs . Respondent has the burden of production under section 7491(c) wi h respect to the accuracy-related penalty under section 66 2 . To meet that burden, respondent must come forward with suffi ient evidence indicating that it is appropriate to impose than penalty . Higbee v . Commissioner , 116 T .C . 438, 44 6 (2001) . Although respondent bears the burden of produ
Respondent contends that petitioner'sposition is frivolous and that, pursuant to section 6673(a)(1), the Court should impose a penalty on petitioner .
Section 66 of the Internal Revenue Code is useable and applicable by spouse in 1986. * * *[Ms. Smith and petitioner] each agree that they will file their separate returns for 1986 in accordance with said section and pay the tax computed under said separate returns. The Internal Revenue Service examined petitioner’s 1986 Federal income tax return. I
Statutory Relief Under Section 66 Having concluded that petitioner’s share of community income is $45,713, we consider the application of section 66. Under certain circumstances, section 66 provides that a taxpayer may be relieved of liability on community income. Section 66(a) addresses the treatment of community income in the case of spouses who live apart. Section 66(b) allows the Secretary to disallow the benefits of community property laws if the taxpayer acted as if he or she were solely e
come as community property income or in allocating half of it to Mrs. Rinn. We therefore consider petitioners to have conceded these issues. See Vincent v. Commissioner, T.C. Memo. 1994-345. Nor has Mrs. Rinn sought relief from liability pursuant to sec. 66; accordingly, we deem her to have waived any such claim. As previously noted, respondent concedes that the dental practice income should not be double counted in Mr. and Mrs. Rinn’s taxable incomes and that deficiencies in petitioners’ taxes
Held: Unlike sec. 6015(e), I.R.C., sec. 66, I.R.C.
66 provides that a taxpayer may be relieved of liability from Federal income tax on community property earned by a spouse.
Under certain circumstances, section 66 provides that a taxpayer may be relieved of liability from Federal income tax on community property income earned by a spouse.
ehart v. Commissioner, supra, herein by this reference. On June 21, 1991, Jeana L. Yeager (Ms. Yeager)4 signed a loan application for $75,000 from Advanta Mortgage Corp. USA 2 The question of whether Jeana L. Yeager is entitled to relief pursuant to sec. 66 or 6015 is moot because in Rinehart v. Commissioner, T.C. Memo. 2002-9, we concluded that Mr. Rinehart engaged in his horse breeding activity for profit. 3 Unless otherwise indicated, all section references are to the Internal Revenue Code in
ehart v. Commissioner, supra, herein by this reference. On June 21, 1991, Jeana L. Yeager (Ms. Yeager)4 signed a loan application for $75,000 from Advanta Mortgage Corp. USA 2 The question of whether Jeana L. Yeager is entitled to relief pursuant to sec. 66 or 6015 is moot because in Rinehart v. Commissioner, T.C. Memo. 2002-9, we concluded that Mr. Rinehart engaged in his horse breeding activity for profit. 3 Unless otherwise indicated, all section references are to the Internal Revenue Code in
ases in the Tax Court, the statute of limitations is a jurisdictional question). Unless otherwise indicated, all Rule references are to the Tax Court Rules of Practice and Procedure. - 4 - Additions to Tax Petitioners Deficiency Sec. 6653 (a) (1) · Sec. 66:53 (a) (2) Sec. 66 1 The Harlans $548,186 $27,409 1 . $137,.0 7 The Ockels 62,490 3,125 . 2 15,6 3 ¹ 50 percent of interest due on $548,186. 2 50 percent of interest due on $62,490. The inst'ant cases have been severed from docket Nos. 15653-
However, petitioner contends that respondent made no determination in the notice of deficiency to disallow the benefits of community property law pursuant to section 66(b), that respondent's reliance on section 66(b) is a "new matter" within the meaning of Rule 142(a),10 and that respondent must bear the burden of proving that section 66(b) applies.11 When the Commissioner attempts to rely on a basis that is beyond the scope of the original deficiency determinatio
ed for 1983 through 1988. In the notices of deficiency issued to IRA for 1983 through 1988, respondent determined that the entire defíciency for each year was a substantial understatement of tax fo which IRA was liable for the addit·ion to tax under section 66 1(a). IRA contends that it is not liable for the section 6661(a) addition to tax because there was substantial authority for the positions it took with respect to the disallowed items. - 605 - and capital loss items, IRA failed to make any
sole right of a court is to ascertain, through the rule stated, and apply the authority. [Porges v. United States Mortgage and Trust Co., supra at 426; cf. Matter of Zalewski, 55 N.E. 2d 184, 187 (1944); 3 NY Jur. Agency and Independent Contractors sec. 66 (1979).] Petitioner's power of attorney authorized the attorney-in- fact to "do anything he or she considers necessary and proper to conduct this business with the Bank". [Emphasis added.] "[T]his business" refers to the explicit grant of aut