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ignorant of an understatement of tax that gives rise to a
deficiency. Indeed, the Commissioner argues here that:
Instead of filing an amended return,
[Rosalee] could have contacted respondent and
informed him of the unreported embezzlement
income. Once informed, respondent could have
proceeded with examination procedures and
[Rosalee] could have agreed to respondent’s
determination of additional tax.
Resp. Br. at 30. This would have led to the determination of a
deficiency and presumably allowed David to file a successful
request for relief under section 6015(b). See, e.g., Haltom v.
Commissioner, T.C. Memo. 2005-209 (ignorance of embezzlement
income).
It would seem a trap for the unwary--and an inefficient
requirement from the IRS’s perspective--to require spouses to go
through an audit whose outcome is preordained in a situation like
that faced by the widow Rosenthal or Mr. Billings, rather than
fess up by filing an amended return.
Tax law is of course filled with such traps and has never
been viewed as a garden of efficiency, but Congress itself has
directed the Commissioner--at least in this area--to take a
somewhat more open-ended view of the law. Section 6015(f)
directs him to consider “all the facts and circumstances.” The
revenue procedure likewise counsels the Commissioner’s employees
that, in weighing an application for relief, “No single factor
will be determinative of whether equitable relief will or will
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Last modified: November 10, 2007