Tax Brake with Robert G. Nath, Esq.
"Innocent Spouse Can Survive Even If You Don't"
- Week of 5/06/02 -
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| It's widely known that the recently (1998) enacted innocent spouse provisions were intended to liberalize the law in this area. And, in fact, they did. Traditional innocent spouse status is now somewhat easier to prove than in the past. Moreover, there is a new provision, which helps people who cannot prove innocent spouse status. This is the “separate liability election,” which in theory enables you to split your income from that of your less-than-innocent spouse.
But Section 6015 of the Internal Revenue Code, which embodies these provisions, does not state what happens if the “innocent” spouse passes away. Can his or her spouse still claim the benefits? Yes, says the IRS (apparently relying on the liberal spirit of the new law). In a technical advice memo from the Chief Counsel (the IRS' top lawyers), the IRS now says that the surviving spouse can pursue the claim even if the statute does not specifically provide for such relief. That's because executors and administrators of estates have a “myriad of election options” available to them. These relate to almost every aspect of a decedent's income and taxes. There is no policy reason why an executor or administrator should be barred from asserting innocent spouse relief, and in fact now they can do so. This new advice contradicts some decisions to the contrary that had been published, but on a lower (“field advice”) level. As a result, in those cases where an innocent spouse passes away, the claim is still available. This is important to many surviving spouses because if Spouse 1 dies owing federal taxes, those taxes become a claim against the spouse's estate. They do NOT disappear. Many assets of Spouse 1 therefore become subject to this tax claim, to the detriment of Spouse 2 and the children. Now, Spouse 2 can pursue the innocent spouse claim and perhaps save money for the estate and the beneficiaries. Proving innocent spouse status is still unchanged. The new IRS advice makes no statement on HOW to prove the case, only that the defense is available despite the death of the spouse who could claim innocence. |
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