Opinion ID: 629072
Heading Depth: 3
Heading Rank: 2

Heading: Equitable Result, 26 U.S.C. Sec. 6013(e)(1)(D)

Text: 25 The requirement that relief be granted 'only where it would be inequitable to hold the innocent spouse liable' lies at the heart of the section's history.... Guth, 897 F.2d at 443. [I]t would not be inequitable to hold the other spouse liable for the deficiencies in tax if substantial benefits from the omissions in income were received. Hammond, 58 T.C.M. (CCH) at 1200; Hinds, 56 T.C.M. (CCH) at 106 (significant benefit is one factor that is relevant); see Price, 887 F.2d at 966 n. 12. But, normal support is not a significant benefit. Hinds, 56 T.C.M. (CCH) at 107; Sanders, 509 F.2d at 168 (normal support is measured relative to each family's standard of living); Mertens, Law of Federal Income Taxation Sec. 55.187 at 328-29. 26 In its response to Emilia's motion for reconsideration, the Tax Court repeated its prior reasoning and added that it would not be inequitable to deny relief because Emilia had enjoyed the fruits of Erminio's dishonesty. The Tax Court stated that on the reported income, Emilia enjoyed dining out weekly, at least 4 trips to Las Vegas yearly, the expertise of a gardener, regular visits to the hair salon, and other leisure activities. The finding of enjoyment does not find support in the record. 27 In its original order, the Tax Court found that Emilia and Erminio maintained a modest lifestyle. That lifestyle consisted of: (1) periodic trips to the hairdresser for Emilia (once a week but not every week); (2) bowling and eating out at cafeteria type restaurants twice weekly; and (3) hiring a gardener. The only vacations they took were visits to Las Vegas for two days or so. In Las Vegas, they would visit Erminio's sickly brother. Emilia also played the 25 cent slot machines at the casinos, with a portion that Erminio gave her for that purpose. 28 During 1980 to 1982, Emilia's lifestyle did not improve or change. Erminio did not give any gifts to Emilia or make any lavish purchases. See Hammond, 58 T.C.M. (CCH) at 1200 (spouse bought luxury items with omitted income). The fact that they had a gardener is not particularly extravagant. See Botsaris, 56 T.C.M. (CCH) at 171 (hiring housekeeper was not extravagant). There is no indication that Emilia and Erminio were not doing exactly the same things before 1980. See Hinds, 56 T.C.M. (CCH) at 107. Moreover, Erminio did not use the tax benefits attributable to the understatements to purchase property in which Emilia received an ownership interest. See id.; Clevenger, 826 F.2d at 1382. Nor, even after she took control of Erminio's assets when he fell ill, did her lifestyle change. Rather, her modest style of living continued until her accounts were depleted--it appears that they had been by the time of the Tax Court's opinion in 1991. There is nothing to indicate that these accounts were the receptacles of the money Erminio diverted from his business. No one can know exactly where that money went but it is clear that he wrote checks for thousands of dollars in Las Vegas. Given those facts, it is difficult to imagine how Emilia actually benefited from Erminio's income omissions. See Hinds, 56 T.C.M. (CCH) at 107. The Tax Court's cryptic finding to the contrary was clearly erroneous. 29 Emilia has satisfied each of the requirements under section 6013(e)(1). She is an innocent spouse and should not be held liable for her tax liabilities and the penalties attributable to the income omissions. See Price, 887 F.2d at 966.