Court Opinion

ID: 4486385
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:34:23.857093+00
Date Added: 2024-06-11T14:50:34.555572
License: Public Domain

SWIFT, J., concurring: As the majority and dissenting opinions point out, certain language in some of the court opinions under section 6013(e)(1)(C) suggests the existence of a conflict or disagreement among the courts as to the proper description of the “knowledge” and “reason-to-know” tests of that section. As I read the opinions, however, I believe that the differences in the language used to describe the tests of section 6013(e)(1)(C) are more a matter of semantics than of substance. The underlying factual analysis reflected in the various opinions generally is consistent. In Stevens v. Commissioner, 872 F.2d 1499, 1504 (11th Cir. 1989), affg. a Memorandum Opinion of this Court, in Purcell v. Commissioner, 826 F.2d 470, 473 (6th Cir. 1987), affg. 86 T.C. 228 (1986), and in other “deduction” and “omission” cases under section 6013, this Court and the Courts of Appeals typically analyze all of the facts and circumstances and base their holdings on whether the taxpayers knew or had reason to know of the circumstances giving rise to the understatements. The circumstances considered include more than mere knowledge of the underlying transactions. They include the size and significance of the transactions, the magnitude of the transactions vis-a-vis other items on the tax returns, and the participation of the taxpayers in and the benefits the taxpayers received from the transactions. The Ninth Circuit’s factual analysis in Price v. Commissioner, supra, is consistent with this approach, as follows: we do not mean to say that a spouse’s knowledge of the transaction underlying the deduction is irrelevant. Obviously, the more a spouse knows about a transaction, ceteris paribus, the more likely it is that [the spouse] will know or have reason to know that the deduction arising from that transaction may not be valid. We merely conclude that standing by itself, such knowledge does not preclude relief. [887 F.2d at 963 n. 9; emphasis added.] The Eleventh Circuit has explained further, as follows: The test establishes a “duty of inquiry” on the part of the alleged innocent spouse. Hence, the court’s analysis must focus on whether the spouse had sufficient knowledge of the facts underlying the claimed deductions such that a reasonably prudent person in the taxpayer’s position would question seriously whether the deductions were phony. * * * [Stevens v. Commissioner, 872 F.2d at 1505.] Applying this analysis to the erroneous-basis deduction at issue in this case, the conclusion reached by the majority herein is fully supported by the facts. The size and significance of the transaction in which a major portion of the ranch was sold, the magnitude of the transaction vis-a-vis other items on the tax return, petitioner’s, familiarity with and the benefits she received from the ranch (having lived on the ranch every summer since the ranch was purchased in 1971), taken together with her specific knowledge of the sale of a portion of the ranch, support the conclusion that petitioner knew or had reason to know of the circumstances giving rise to the understatement relating to the erroneous-basis deduction. Accordingly, petitioner had a duty of inquiry, and petitioner’s alleged deference to her husband’s judgment and management of the family’s financial matters does not qualify petitioner as an innocent spouse. Hamblen, and Jacobs, JJ., agree with this concurring opinion.