Court Opinion

ID: 9476583
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:59:44.264117+00
Date Added: 2024-06-11T17:45:23.929708
License: Public Domain

NATHANIEL R. JONES, Circuit Judge,
concurring.
I concur in today’s affirmance of the tax court’s decision denying appellant relief under the “innocent spouse” provision of the Internal Revenue Code, 26 U.S.C. § 6013(e) (Supp. III 1985). I write separately only to register my disagreement with the court’s attempt to distinguish the recent decision in Shenker v. Commissioner, 804 F.2d 109 (8th Cir.1986), cert. denied, - U.S. -, 107 S.Ct. 2460, 95 L.Ed.2d 869 (1987). With all due respect, it is my view that we should reject outright the Eighth Circuit’s analysis of section 6013(e) as an erroneous interpretation of an admittedly counter-intuitive provision of the Code.
As Judge Kennedy notes, the clause immediately preceding section 6013(e) provides that, when a joint return is filed, both spouses are jointly and severally liable for the amount of tax due on the aggregate income. 26 U.S.C. § 6013(d)(3) (1982). However, if “there is a substantial understatement of tax attributable to grossly erroneous items of one spouse,” id. § 6013(e)(1)(B) (emphasis added), the innocent spouse may escape liability for the tax, interest and penalties attributable to such understatement if the remaining requirements of subsection (e)(1) are satisfied. Where the understatement of tax is attributable to a disallowed deduction, the Code provides that it will be deemed “grossly erroneous” if there “is no basis in fact or law” for the claimed deduction. Id. § 6013(e)(2)(B).
Again, as Judge Kennedy observes, the tax court has taken the position that for a claimed deduction of one spouse to be “grossly erroneous” under section 6013(e)(1)(B), it must be “fraudulent,” “frivolous,” “phony,” or “groundless.” As the tax court recently explained:
[I]t simply does not follow that because deductions lacking in a factual or legal basis will be disallowed, all deductions which are disallowed lack a factual or legal basis. Petitioner may not rely on the disallowance or her inability to substantiate the deductions alone to prove a lack of basis in fact or law.
Douglas v. Commissioner, 86 T.C. 758, 763 (1986). I agree with this reading of the statute.
By contrast, the Eighth Circuit in Shenker seemingly rejects this analysis. By looking to section 165(a) and (g), 26 U.S.C. § 165(a), (g) (1982), for the Code’s explanation of the deductibility of worthless stock,1 the Shenker court has equated the nonde*477ductibility of a claimed loss with the conclusion that a deduction taken for that loss has “no basis in fact or law.” In other words, according to the Eighth Circuit, a claimed deduction for worthless stock or bad nonbusiness debts that is disallowed under sections 165 or 166 is, necessarily, “grossly erroneous” for purposes of section 6013(e)(1)(B) and (e)(2)(B).
I do not think that the term “grossly erroneous” deduction can or should be defined simply as an “erroneous” deduction. Such a reading would render superfluous not only the adverb “grossly,” but the entire concept of “grossly erroneous deduction,” since no would-be innocent spouse seeks relief from an approved deduction. In this manner, the Shenker interpretation substantially undermines the integrity of the presumption of joint and several liability expressed in section 6013(d)(3), and provides a practical incentive for spouses to remain ignorant of each other’s business dealings as well as the various items on their joint tax returns.
I would reject the Shenker court’s interpretation of the innocent spouse provision and embrace the analysis set forth in the tax court’s cases.

. The concomitant provision for the deductibility of bad nonbusiness debts is found at 26 U.S.C. § 166(d) (1982 & Supp. III 1985).