Court Opinion

ID: 4486388
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:34:23.87175+00
Date Added: 2024-06-11T14:53:49.304864
License: Public Domain

WILLIAMS, J., dissenting: I agree with Judge Kórner’s dissent and write only to add what I foresee as the regrettable implications of the majority’s analysis. The majority holds that solely because Mrs. Bokum knew of the transaction, she cannot be an innocent spouse (though the majority must itself resolve exactly what the transaction at issue is, see Majority Op. at 146). Specifically, the majority formulates the applicable legal standard as follows: “that the taxpayer claiming innocent spouse status must establish that he or she is unaware of the circumstances that give rise to the error on the tax return, and not merely be unaware of the tax consequences.” (Majority Op. at 145-146, emphasis added.) In articulating this standard the majority observes, without reference to any legislative history, that the “language changes made by the 1984 Act have not changed the old rule * * * .” Notably, however, the House Committee Report (H. Rept. 98-432, (Part 2) (1984), hereafter report) does refer to this issue in the “Reasons for Change” section explaining the proposed amendments to section 6013(e). The report provides as follows: The committee believes that the present law rules relieving innocent spouses from liability for tax on a joint return are not sufficiently broad to encompass many cases where the innocent spouse deserves relief. Relief may be desirable, for example, where one spouse claims phony business deductions in order to avoid paying tax and the other spouse has no reason to know that the deductions are phony * * * . [Report at 1502. Emphasis supplied.] It is noteworthy that the Committee did not phrase the standard as the majority does (as whether the other spouse had reason to know about the deductions) but phrased the issue as whether the other spouse had reason to know that the deductions were phony. The majority agree the claim of basis on the tax return was “phony” (majority op. at 144). The majority also agree that Mrs. Bokum had no reason to know that the claimed basis was phony (majority op. at 132). Despite these facts, the majority fails to accord Mrs. Bokum relief from tax liability on these phony claims she did not know about because Mrs. Bokum “knew or should have known of the circumstances that gave rise to the substantial understatement * * * .” (majority op. at 148). It is instructive to review the facts surrounding these circumstances giving rise to the phony basis claim: (1) Mrs. Bokum “did not participate in the business decision to sell, and did not know how much” was received in the sale (majority op. at 129), (2) Mrs. Bokum did not play “any role in the preparation of their 1977 joint tax return nor in the formulation of the tax treatment to be accorded the distribution on the tax return” (majority op. at 132), and (3) the tax return was presented to Mrs. Bokum for signature after it had been prepared by accountants (majority op. at 132). There is nothing on the return reporting the transaction at issue that would cause anyone to question the accountants’ calculation of basis. The necessary implication of holding that Mrs. Bokum “should have known” is to require her to hire an independent tax adviser to review the return prepared by her husband’s accountants. As the Supreme Court has stated in a slightly different context, Most taxpayers are not competent to discern error in the substantive advice of an accountant or attorney. To require the taxpayer to challenge the attorney, to seek a “second opinion,” or to try to monitor counsel on the provisions of the Code himself would nullify the very purpose of seeking the advice of a presumed expert in the first place. * * * {United States v. Boyle, 469 U.S. 241, 251 (1985).] I believe that, as a matter of justice, such a burden is intolerable and that, as a matter of statutory interpretation, the majority’s analysis contradicts the Congress’ explicit attempt to (using the report’s choice of words) “liberalize” (report at 1502) the relief afforded to people in Mrs. Bokum’s circumstances. Korner, and Whalen, JJ., agree with this dissenting opinion.