Tax Deficiency – Innocent Spouse Relief

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7^th Circuit Court of Appeals

Case Name: Frances L. Rogers v. Commissioner of Internal Revenue

Case No.: 17-3358

Officials: BAUER, EASTERBROOK, and SCUDDER, Circuit Judges.

Focus: Tax Deficiency – Innocent Spouse Relief

A married couple’s choice to file a joint federal income tax return results in both individuals assuming full liability for any owed tax. Frances Rogers and her husband John did so for 2004. When the Internal Revenue Service subsequently found the return deficient, the Rogers’ pushed back, ultimately took the IRS to trial, and lost. Frances Rogers, a former teacher with an MBA, doctorate, and law degree, attended the trial. Three years later, and facing a substantial tax deficiency and related penalties, Mrs. Rogers sought so-called innocent spouse relief under the Internal Revenue Code. The Tax Court rejected the claim, finding that Mrs. Rogers’s meaningful participation in the trial precluded her from after-the-fact seeking to avoid responsibility for those liabilities.

On appeal Mrs. Rogers contends that a disclosure violation by the IRS should have precluded the Tax Court from considering the Commissioner’s argument that she was barred from seeking innocent spouse relief. As Mrs. Rogers would have it, the IRS was bound under provisions in its Internal Revenue Manual to notify her before the 2012 trial of her right to request innocent spouse relief. That it failed to do so, she contends, means that the Tax Court should not have permitted the Service to invoke the meaningful participation bar in § 6015(g)(2).

We cannot agree. Even assuming that Mrs. Rogers could establish that she did not receive a particular disclosure, she has identified no authority that a disclosure shortcoming precluded the Service from taking the position that she was not entitled to innocent spouse relief. See Matter of Carlson, 126 F.3d 915, 922 (7th Cir. 1997) (explaining that the “procedures in the Internal Revenue Manual are intended to aid in the internal administration of the IRS; they do not confer rights on taxpayers”). This argument need not detain us further.

The Tax Court stood on solid ground when rejecting Mrs. Rogers’s position. See Frierdich v. Comm’r, 925 F.2d 180, 185 (7th Cir. 1991) (explaining that the Tax Court is not required to accept a taxpayer’s testimony as absolute fact). Credibility matters. This principle applies with particular force where, as here, the taxpayer’s testimony is self-serving and at odds with her education and experience.

The Tax Court also found that Mrs. Rogers’s participation through her counsel, an experienced tax attorney, in the prior Tax Court proceedings indicated she participated meaningfully. Based on our review of the record, we cannot say any of these findings reflect clear error.

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.