Tax Court Says Spouse Was Not So Innocent

In Constance H. Briley v. Commissioner of Internal Revenue, docket number 7782-17 (T.C. Memo. 2019-55), the Tax Court denied innocent spouse relief to a Virginia woman, who the court said had reason to know of an error on her joint tax returns.

Findings of Fact

Constance H. Briley married Mr. Briley in 1988. They were married during the years involved; and although they separated in 2013, they remained married as of the date of trial.

Mrs. Briley and Mr. Briley filed their 2004 and 2005 Forms 1040, U.S. Individual Income Tax Return, as married filing jointly.

Mrs. and Mr. Briley kept their finances separate. Mrs. Birley deposited her wages of $45,845 in 2004 and $34,251 in 2005 in her separate bank account.

Mr. Briley’s business receipts were deposited in accounts controlled by Mr. Briley.

Mrs. and Mr. Briley divided responsibility for their household expenses. Mrs. Birley paid the utility expenses from her bank account, while Mr. Briley paid the family’s grocery bills and the mortgage on the marital home using Briley Builders’ bank accounts.

Mr. Birley’s business showed a large loss even though it was profitable. The loss was the result of deducting certain expenses rather than capitalizing them, as well as several other improper deductions.

The IRS audited the taxpayers’ tax returns for 2004 and 2005 and determined deficiencies in income tax and penalties against Mrs. and Mr. Briley. Taxpayers owed about $1,000,000 in taxes and penalties.

Taxpayers appeared pro se in tax court to dispute the audit adjustments. Subsequently, Taxpayers appealed the tax court’s decision.

As the underlying case proceeded through the court, Mr. Briley assaulted two police officers and was sentenced to six years in prison. In 2014 Constance H. Briley separated from Mr. Briley and initiated divorce proceedings.

Ultimately, Taxpayers did not prevail in challenging the underlying liability and their account proceeded through the collections process.

Innocent Spouse Relief

On March 25, 2016, the IRS received Constance H. Briley’s timely filed Form 8857, Request for Innocent Spouse Relief, for 2004, 2005, and 2009 through 2011.

On February 1, 2017, the IRS issued a final determination denying Mrs. Birley’s relief under section 6015(b), (c), and (f). The determination letter stated that it would not be unfair to hold Mrs. Birley liable for the understatement of tax on the joint 2004 and 2005 income tax returns because Mrs. Birley knew, or had reason to know, of the items causing the tax debt.

Court’s Opinion

Section 6015(b)(1) provides that a taxpayer will be relieved of liability for an understatement of tax if:

(A) a joint return was made for the taxable year in question;

(B) on such return there is an understatement of tax attributable to erroneous items of the nonrequesting spouse;

(C) the requesting spouse “establishes that in signing the return he or she did not know, and had no reason to know, that there was such understatement”;

(D) taking into account all the facts and circumstances, it would be inequitable to hold the requesting spouse liable for the deficiency attributable to the understatement; and

(E) the requesting spouse elects to invoke the benefits of subsection (b) within two years after the date the Secretary has begun collection actions with respect to the requesting spouse.

The government concedes that Mrs. Birley was able to meet (A) (B) and (E), but not (C) or (D).

Section 6015(b)(1)(C) Reason To Know

Section 6015(b)(1)(C) requires that the spouse requesting relief must establish that he/she did not know and had no reason to know of the understatement of tax on the return.

“A taxpayer who signs a return is generally charged with constructive knowledge of its contents. In establishing that a taxpayer had no reason to know, the taxpayer must show that she was unaware of the circumstances that gave rise to the error and not merely unaware of the tax consequences. Section 6015 does not protect a spouse who turns a blind eye to facts readily available to her.” Porter v. Commissioner, 132 T.C. 203, 211-212 (2009)

The court believes that Constance H. Briley had reason to know of the understatement of tax on her and Mr. Briley’s joint Form 1040 for each of the years involved. Constance H. Briley was college educated.

Even a cursory review of each year’s tax return would have revealed that the return reported a large negative income and caused a reasonably prudent individual in the shoes of petitioner to question the accuracy of the negative income.


After considering all of the facts and circumstances, the court finds that two factors weight against relief with the remaining factors neutral. The court therefore concludes that it would not be inequitable to hold Mrs. Birley liable for the payment of tax in this matter.

The argues that Mrs. Briley should have raised questions when her husband’s contracting business showed a large loss despite it being profitable.

Options for resolving tax debt

Taxpayers that owe outstanding IRS tax debt should apply for one of the collections alternatives:

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