Opinion ID: 6743
Heading Depth: 2
Heading Rank: 2

Heading: the position of the irs

Text: 28 Throughout this dispute--in its Notice to Taxpayer, in its answer to Taxpayer's Petition in Tax Court, in its response to Taxpayer's informal discovery requests, and in its correspondence to Taxpayer as late as one month before the scheduled trial date--the IRS consistently took the position that Taxpayer had a community property interest in the renewal commissions from insurance policies written by her husband prior to the termination of their marital community, but neither payable nor actually paid to her husband until after such termination. Based on this patently erroneous legal conclusion, the IRS continued to insist that Taxpayer was required to report this income for the years in which the commissions were paid to her husband, regardless of whether she had received any of the income or had any way short of litigation to obtain direct payment (which she did not). 29 As noted, in January 1992, the IRS articulated another reason why Taxpayer was deficient in the payment of her federal taxes between 1978 and 1984: that she  'constructively' received ... policy renewal income because it was deposited into an escrow account for the benefit of both spouses during the divorce proceedings. This position was as factually wrong (because the account was not established until 1985) as the community property position of the IRS was legally wrong. 30 As these were the only two positions proffered by the United States in contending that Taxpayer was deficient on her taxes between 1978 and 1984, it is to these positions only that we may look for a reasonable basis in law and fact. 20 We first explain why the IRS' argument that Taxpayer constructively received renewal commission income had no basis in fact; we then demonstrate why the IRS' position that Taxpayer had a community property interest in the assets formerly belonging to the marital community, and thus to the income therefrom, had no basis in fact or law. 31