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Elizabeth Varela Case Study

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Case 2: Elizabeth Varela and Jose M. Lozano vs. Commissioner
Facts: Petitioner and intervenor married in 1985, separated in July 2009, and divorced in 2012. Previously, in 2003, petitioner began an action for divorce from intervenor, but she discontinued that action before it became complete. Following that action, however, petitioner changed the way she and intervenor dealt with their finances. Among those changes, petitioner and intervenor kept separate checking accounts and credit card accounts. Petitioner was employed during 2007 and 2008 and, during those years, she caused her employer to deposit her pay into her separate bank account. She and intervenor divided responsibility for their household expenses. Each paid from his (or her) …show more content…
Ryke submitted an innocent spouse relief request for 2008 through 2012. The Rykes' liabilities for 2010 and 2011 had been paid, and her request for those years was dismissed. The IRS denied her request for 2008, 2009 and 2012. The Rykes then paid the remaining liability for 2008, leaving approximately $55,000 of outstanding tax debt for 2009 and 2012. In August 2015, Dr. Ryke filed a Tax Court petition to challenge the innocent spouse denial for those years. The IRS argued that Dr. Ryke knew or had reason to know that the reported tax liabilities were not paid. According to the court, the wife's knowledge of her husband's poor credit rating and high levels of debt, plus her previous payment for one year of the couple's delinquent joint tax liabilities, gave her both actual and practical knowledge that their taxes had not been paid and would not be paid and her petition for Innocent Spouse Relief under 6015(f) were denied. Statement of …show more content…
(2) Apportionment of relief-If an individual who, but for paragraph (1)(C), would be relieved of liability under paragraph (1), establishes that in signing the return such individual did not know, and had no reason to know, the extent of such understatement, then such individual shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent that

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