[Federal Register Volume 80, Number 224 (Friday, November 20, 2015)]
[Proposed Rules]
[Pages 72649-72663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29609]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-134219-08]
RIN 1545-BI82


Relief From Joint and Several Liability

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations relating to relief 
from joint and several liability under section 6015 of the Internal 
Revenue Code (Code). The regulations reflect changes in the law made by 
the Tax Relief and Health Care Act of 2006 as well as changes in the 
law arising from litigation. The regulations provide guidance to 
married individuals who filed joint returns and later seek relief from 
joint and several liability.

DATES: Written or electronic comments and requests for a public hearing 
must be received by February 18, 2016.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-134219-08), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
134219-08), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC; or sent electronically via the Federal 
eRulemaking Portal at www.regulations.gov (IRS REG-134219-08).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Nancy Rose at (202) 317-6844; concerning submissions of comments 
contact Oluwafunmilayo Taylor, (202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR part 1) for relief from joint and several liability 
under section 6015 of the Code and relief from the operation of state 
community property law under section 66.
    Section 6013(a) permits a husband and wife to file a joint income 
tax return. Section 6013(d)(3) provides that spouses filing a joint 
income tax return are jointly and severally liable for liabilities for 
tax arising from that return. The term ``tax'' includes additions to 
tax, additional amounts, penalties, and interest. See sections 
6665(a)(2) and 6601(e)(1). Joint and several liability allows the IRS 
to collect the entire liability from either spouse who signed the joint 
return, without regard to whom the items of income, deduction, credit, 
or basis that gave rise to the liability are attributable. Prior to 
1998, section 6013(e) provided limited relief from joint and several 
liability. In 1998, Congress enacted the Internal Revenue Service 
Restructuring and Reform Act of 1998, Public Law 105-206, 112 Stat. 685 
(1998), which repealed section 6013(e) and replaced it with section 
6015. Section 6015 applies to liabilities arising after July 22, 1998, 
and liabilities that arose on or before July 22, 1998, but remained 
unpaid as of that date.
    Section 6015 provides three avenues for relief from joint and 
several liability--sections 6015(b), (c) and (f). To be eligible for 
relief from joint and several liability, a spouse must request relief. 
Under section 6015(b), a requesting spouse may be entitled to relief 
from joint and several liability for an understatement of tax 
attributable to erroneous items of the nonrequesting spouse. Section 
6015(c) permits a taxpayer who is divorced, separated, widowed, or who 
had been living apart

[[Page 72650]]

from the other spouse for 12 months to allocate his or her tax 
deficiency between the spouses as if separate returns had been filed. 
Claims for relief under section 6015(b) and (c) must be made within two 
years of the IRS's first collection activity against the requesting 
spouse. Finally, section 6015(f) confers discretion upon the 
Commissioner to grant equitable relief from joint and several liability 
for understatements and underpayments, based on all the facts and 
circumstances. Regulations under section 6015 were first prescribed in 
TD 9003, Federal Register (67 FR 47278) on July 18, 2002.
    These proposed amendments are necessary to carry out the provisions 
of section 6015 and to reflect changes in the law since the publication 
of TD 9003. On December 20, 2006, Congress enacted the Tax Relief and 
Health Care Act of 2006, Public Law 109-432, div. C, title IV, section 
408, 120 Stat. 2922, 3061-62 (2006) (the 2006 Act). The 2006 Act 
amended section 6015 to provide the United States Tax Court with 
jurisdiction to review the Commissioner's determination to deny 
equitable relief under section 6015(f) when the Commissioner has not 
determined a deficiency and to suspend the period of limitation for 
collection under section 6502 when relief is requested only under 
section 6015(f). The proposed regulations also provide clarification 
and additional guidance on procedural and substantive issues related to 
the three types of relief from joint and several liability under 
section 6015.
    Section 66 provides relief for a spouse who did not file a joint 
return in a community property state and did not include in gross 
income an item of community income that would be attributable solely to 
the nonrequesting spouse but for the operation of state community 
property law. Regulations under section 66 were first prescribed in TD 
9074, Federal Register (68 FR 41067) on July 10, 2003. The proposed 
regulations under section 66 contain only non-substantive changes.
    Recently, other amendments to the regulations under section 6015 
were proposed in a notice of proposed rulemaking (REG-132251-11) 
published in the Federal Register (78 FR 49242) on August 13, 2013. 
Those regulations proposed changes to Sec.  1.6015-5 to remove the two-
year deadline for taxpayers to file requests for equitable relief under 
section 6015(f), and other changes related to the time and manner for 
requesting relief. Additionally, on September 16, 2013, the IRS issued 
Rev. Proc. 2013-34 (2013-2 CB 397). Rev. Proc. 2013-34 revised the 
factors used in determining if a requesting spouse is eligible for 
equitable relief under sections 66(c) and 6015(f).

Explanation of Provisions

    These regulations propose to make a number of significant changes 
to the existing regulations. These changes include providing additional 
guidance on the judicial doctrine of res judicata and the section 
6015(g)(2) exception to res judicata when a requesting spouse did not 
meaningfully participate in a prior court proceeding. The regulations 
propose to add a list of acts to be considered in making the 
determination as to whether the requesting spouse meaningfully 
participated in a prior proceeding and provide examples of the 
operation of these rules. The regulations also (1) propose a definition 
of underpayment or unpaid tax for purposes of section 6015(f); (2) 
provide detailed rules regarding credits and refunds in innocent spouse 
cases; (3) expand the rule that penalties and interest are not separate 
items from which relief can be obtained to cases involving 
underpayments; (4) incorporate an administratively developed rule that 
attribution of an erroneous item follows the attribution of the 
underlying item that caused the increase to adjusted gross income 
(AGI); (5) update the discussion of the allocation rules under section 
6015(c) and (d); and (6) revise the rules regarding prohibition on 
collection and suspension of the collection statute.

1. Section 1.6015-1

    The procedures for requesting relief on Form 8857, ``Request for 
Innocent Spouse Relief,'' under section 6015 have changed since 2006 
because of the amendments to section 6015(e) made by Section 408 of 
Title IV of Division C of the 2006 Act. The amendments to section 
6015(e) conferred jurisdiction on the Tax Court to review the 
Commissioner's denial of relief under section 6015(f) in cases in which 
a deficiency had not been asserted. The amendments also provided for a 
prohibition on collection and a corresponding tolling of the collection 
statute under section 6502 upon the filing of a request for relief 
under section 6015(f). The amendments apply to any liability for taxes 
arising on or after December 20, 2006, and to any liability for taxes 
arising before December 20, 2006, and remaining unpaid as of that date. 
As a result of the amendments, any request for relief under section 
6015 will toll the collection statute, making it unnecessary for a 
spouse to elect or request a particular type of relief as required 
under Sec.  1.6015-1(a)(2) of the current regulations. Accordingly, 
Sec.  1.6015-1 and all sections referencing an election under 
Sec. Sec.  1.6015-2 and 1.6015-3 or a request for relief under Sec.  
1.6015-4 are proposed to be revised to reflect that a requesting spouse 
is no longer required to elect or request relief under a specific 
provision of section 6015. Thus, beginning with the June 2007 revision 
to the Form 8857, a requesting spouse makes a single request for relief 
on Form 8857. Section 1.6015-1 is also being revised to provide that 
the IRS will consider in all cases whether the requesting spouse is 
eligible for relief under Sec.  1.6015-2 or Sec.  1.6015-3, and if 
relief is not available under either of those sections, under Sec.  
1.6015-4.
    Section 6015(g)(2) provides an exception to the common law doctrine 
of res judicata except in a case in which relief under section 6015 was 
at issue in a prior court proceeding or if a requesting spouse 
meaningfully participated in a prior proceeding. in which relief under 
section 6015 could have been raised Current Sec.  1.6015-1(e) is being 
revised in these proposed regulations to provide more detailed guidance 
on how the exception to res judicata and the meaningful participation 
rule work, and to reflect developments in the case law since 2002 
(described below). Proposed Sec.  1.6015-1(e)(1) restates the general 
rule from the current regulations.
    Proposed Sec.  1.6015-1(e)(2) incorporates the holding in Deihl v. 
Commissioner, 134 T.C. 156 (2010) (When a requesting spouse generally 
raises relief under section 6015 in a proceeding but does not 
specifically plead relief under any subsection of section 6015, relief 
under section 6015(c) will not be treated as being at issue in that 
proceeding if the requesting spouse was not eligible to elect relief 
under section 6015(c) because the requesting spouse was not divorced, 
widowed, legally separated, or living apart for 12 months at any time 
during the prior proceeding.).
    Proposed Sec.  1.6015-1(e)(3) provides guidance on the meaningful 
participation exception to res judicata provided by section 6015(g)(2). 
A requesting spouse meaningfully participated in the prior proceeding 
if the requesting spouse was involved in the proceeding so that the 
requesting spouse could have raised the issue of relief under section 
6015 in that proceeding. Meaningful participation is a facts and 
circumstances determination. A nonexclusive list of acts was added in 
proposed Sec.  1.6015-1(e)(3) to provide indicators of

[[Page 72651]]

``meaningful participation'' within the context of a bar against relief 
based on the judicial doctrine of res judicata. Whether a requesting 
spouse meaningfully participated in a prior proceeding is based on all 
the facts and circumstances. No one act necessarily determines the 
outcome. The degree of importance of each act varies depending on the 
requesting spouse's facts and circumstances. The following acts, 
derived from case law and experience since 2002, are among the acts the 
IRS and courts consider in making the determination regarding 
meaningful participation: Whether the requesting spouse participated in 
the IRS Appeals process while the prior case was docketed; whether the 
requesting spouse participated in discovery; whether the requesting 
spouse participated in pretrial meetings, settlement negotiations, or 
trial; whether the requesting spouse signed court documents; and 
whether the requesting spouse was represented by counsel in the prior 
proceedings.
    Proposed Sec.  1.6015-1(e)(3)(i) provides a new rule under which 
the requesting spouse will not be considered to have meaningfully 
participated in the prior proceeding if the requesting spouse 
establishes that the requesting spouse performed any of the acts listed 
in proposed Sec.  1.6015-1(e)(3) because the nonrequesting spouse 
abused or maintained control over the requesting spouse, and the 
requesting spouse did not challenge the nonrequesting spouse for fear 
of the nonrequesting spouse's retaliation. Proposed Sec.  1.6015-
1(e)(3)(ii) restates the rule from the current regulations that a 
requesting spouse did not meaningfully participate in a prior 
proceeding if, due to the effective date of section 6015, relief under 
section 6015 was not available in that proceeding.
    Proposed Sec.  1.6015-1(e)(3)(iii) provides that in a case 
petitioned from a statutory notice of deficiency under section 6213, 
the fact that the requesting spouse did not have the ability to 
effectively contest the underlying deficiency is irrelevant for 
purposes of determining whether the requesting spouse meaningfully 
participated in the prior proceeding. Treasury and the IRS disagree 
with the holding in Harbin v. Commissioner, 137 T.C. 93 (2011), in 
which the Tax Court concluded that Mr. Harbin did not meaningfully 
participate in the deficiency case in part because he could not 
effectively contest the part of the deficiency related to his ex-wife's 
gambling losses without her. The Tax Court found that Mr. Harbin could 
not effectively contest this part of the deficiency without his ex-wife 
because she ``was the one with personal knowledge of the winnings and 
losses from the gambling activities'' and was the one ``who maintained 
and provided all of the documentation relating to the gambling 
activities.'' The Tax Court concluded that this knowledge and control 
of the documentation resulted in Mr. Harbin's ex-wife effectively 
exercising ``exclusive control'' of the case. Harbin v. Commissioner, 
137 T.C. at 98.
    Treasury and the IRS believe that the Tax Court applied the 
incorrect standard to determine whether a taxpayer meaningfully 
participated in a proceeding for purposes of section 6015(g)(2). The 
purpose of the meaningful participation exception to res judicata is 
not to ensure that a taxpayer had the opportunity to contest the 
deficiency but rather to ensure that the taxpayer could have raised 
relief under section 6015. Moore v. Commissioner, T.C. Memo. 2007-156. 
This is evident because, if section 6015 relief was at issue in the 
prior case, the taxpayer is not permitted to raise section 6015 relief 
in a subsequent proceeding regardless of the degree to which the 
taxpayer participated or whether taxpayer's ability to contest the 
deficiency was impaired. See Deihl v. Commissioner, 134 T.C. 156, 161 
(2010).
    Proposed Sec.  1.6015-1(e)(4) provides examples of how the rules in 
paragraphs (e)(1), (e)(2), and (e)(3) work. Proposed Sec.  1.6015-
1(e)(5) restates the collateral estoppel rule from current Sec.  
1.6015-1(e) without change.
    Proposed Sec.  1.6015-1(h)(1) and (h)(5) are being revised to 
remove the distinction between electing and requesting relief as 
discussed earlier in this preamble.
    Proposed Sec.  1.6015-1(h)(6) defines ``unpaid tax'' for purposes 
of Sec.  1.6015-4. For purposes of Sec.  1.6015-4, the regulations 
propose that the terms ``unpaid tax'' and ``underpayment'' have the 
same meaning. The unpaid tax or underpayment on a joint return is the 
balance shown as due on the return reduced by the tax paid with the 
return or paid on or before the due date for payment (without 
considering any extension of time to pay). The balance due is 
determined after applying withholding credits, estimated tax payments, 
payments with an extension, and other credits applied against the total 
tax reported on the return. Payments made with the return include 
payments made by check in the same envelope with the return or remitted 
at a later date (but before the due date for payment) with Form 1040-V, 
``Payment Voucher.'' Payments made with the return also include 
remittances made by direct debit, credit card, or other commercially 
acceptable means under section 6311 on or before the due date for 
payment. The determination of the existence and amount of unpaid tax is 
made as of the date the joint return is filed, or as of the due date 
for payment if payments are made after the return is filed but on or 
before the due date.
    If the payments made with the joint return, including any payments 
made on or before the due date for payment (without considering any 
extension of time for payment), completely satisfy the balance due 
shown on the return, then there is no unpaid tax for purposes of Sec.  
1.6015-4. A requesting spouse is not entitled to be considered for 
relief (credit or refund) under Sec.  1.6015-4 for any tax paid with 
the joint return (including a joint amended return). Payments made 
after the later of the date the joint return is filed or the due date 
for payment (without considering any extension of time for payment), 
including offsets of overpayments from other tax years, do not change 
the amount of unpaid tax reported on the joint return. Under Sec.  
1.6015-4, a requesting spouse can only get relief from the unpaid tax 
on the return, and if refunds are available, from any payments made on 
the liability after the later of the date the joint return was filed or 
the due date for payment (without considering any extension of time for 
payment).
    Proposed Sec.  1.6015-1(h)(7) and (h)(8) define understatement and 
deficiency, respectively. Section 6015(b)(3) provides that an 
``understatement'' for purposes of section 6015 has the same meaning 
given to that term by section 6662(d)(2)(A). The definition of 
understatement is in current Sec.  1.6015-2(b) and therefore only 
applies to requests under that section. The term ``understatement,'' 
however, is a term that is relevant to relief under sections 6015(b), 
(c), and (f). These regulations propose to move the definition of 
``understatement'' to proposed Sec.  1.6015-1(h)(7) to allow a 
consistent definition to apply throughout the regulations. Likewise, 
proposed Sec.  1.6015-1(h)(8) adds a definition of deficiency, by 
reference to section 6211 and the regulations under section 6211, to 
clarify that the term deficiency has the same meaning throughout the 
regulations.
    Section 6015(g)(1) provides that requesting spouses generally can 
receive a credit or refund of payments made on the joint liability if 
the requesting spouse is entitled to relief under section 6015. This 
general rule is set forth in proposed Sec.  1.6015-1(k)(1). Section 
6015(g) also provides some limitations

[[Page 72652]]

on the availability of credit or refund. New Sec.  1.6015-1(k)(2) 
through (5) discuss these and other limitations on credit or refund 
when a requesting spouse is eligible for relief.
    Proposed Sec.  1.6015-1(k)(2) sets forth the limitation on refunds 
from section 6015(g)(3) when a requesting spouse is entitled to relief 
under Sec.  1.6015-3. Proposed Sec.  1.6015-1(k)(3) sets forth the rule 
from current Sec.  1.6015-4(b) that relief under Sec.  1.6015-4 is not 
available when the requesting spouse is entitled to full relief under 
Sec.  1.6015-3 but is not entitled to a refund because of the 
limitation in section 6015(g)(3) and proposed Sec.  1.6015-1(k)(2). 
Proposed Sec.  1.6015-1(k)(4) incorporates, consistent with section 
6015(g)(1), the limitations on credit or refund provided by sections 
6511 (general limitations on credits or refunds) and 6512(b) 
(limitations on credits or refunds where the Tax Court determines that 
a taxpayer made an overpayment). This section also clarifies that, in 
general, Form 8857 will be treated as the requesting spouse's claim for 
credit or refund.
    Proposed Sec.  1.6015-1(k)(5) sets forth the general rule that a 
requesting spouse who is entitled to relief is generally not eligible 
for a credit or refund of joint payments made with the nonrequesting 
spouse. Under the proposed rule, a requesting spouse, however, may be 
eligible for a credit or refund of the requesting spouse's portion of 
the requesting and nonrequesting spouse's joint overpayment from 
another tax year that was applied to the joint income tax liability to 
the extent that the requesting spouse can establish his or her 
contribution to the overpayment. Both spouses have an interest in a 
joint overpayment relative to each spouse's contribution to the 
overpayment. See, for example, Gordon v. United States, 757 F.2d 1157, 
1160 (11th Cir. 1985) (``Where spouses claim a refund under a joint 
return, the refund is divided between the spouses, with each receiving 
a percentage of the refund equivalent to his or her proportion of the 
withheld tax payments.''). If the requesting spouse contributed to the 
joint overpayment through withholding, estimated tax, or other 
payments, then the requesting spouse may be entitled to a refund of 
that portion of the overpayment that was applied to the joint 
liability. Under the proposed rule, a requesting spouse in a state that 
is not a community property state may establish his or her portion of a 
joint overpayment using the allocation rules of Rev. Rul. 80-7 (1980-1 
CB 296), or successor guidance. A requesting spouse in a community 
property state may establish his or her portion of a joint overpayment 
using the allocation rules of Rev. Rul. 2004-71 (2004-2 CB 74), Rev. 
Rul. 2004-72 (2004-2 CB 77), Rev. Rul. 2004-73 (2004-2 CB 80), or Rev. 
Rul. 2004-74 (2004-2 CB 84), or successor guidance, whichever is 
applicable to the state in which the requesting spouse is domiciled. 
For copies of Revenue Procedures, Revenue Rulings, notices, and other 
guidance published in the Internal Revenue Bulletin, please visit the 
IRS Web site at http://www.irs.gov.
    These proposed regulations reflect the elimination of the more 
restrictive rule regarding credit or refund when relief is granted 
under Sec.  1.6015-4 in cases involving a deficiency, as provided by 
Rev. Proc. 2013-34. A credit or refund, subject to the limitations in 
Sec.  1.6015-1(k), is available to a requesting spouse who is entitled 
to relief under Sec.  1.6015-4 in both underpayment and deficiency 
cases.
    Current Sec.  1.6015-1(h)(4) provides, in part, that penalties and 
interest are not separate erroneous items from which a requesting 
spouse can be relieved separate from the tax. Rather, relief from 
penalties and interest related to an understatement or deficiency will 
generally be determined based on the proportion of the total erroneous 
items from which the requesting spouse is relieved.
    Thus, under the existing regulations, a requesting spouse who is 
determined not to be eligible for relief from the understatement or 
deficiency stemming from an erroneous item cannot be separately 
relieved from a penalty, such as the accuracy-related penalty, related 
to the item under section 6015. If a requesting spouse is entitled to 
partial relief (such as relief from two of three erroneous items giving 
rise to the understatement or deficiency), then the requesting spouse 
will be entitled to relief from the accuracy-related penalty applicable 
to those two items.
    These regulations propose to move the discussion in current Sec.  
1.6015-1(h)(4) to proposed Sec.  1.6015-1(m). Proposed Sec.  1.6015-
1(m) additionally clarifies, consistent with the statutory 
interpretation in current Sec.  1.6015-1(h)(4), that penalties and 
interest on an underpayment also are not separate items from which a 
requesting spouse may obtain relief under Sec.  1.6015-4. Rather, 
relief from penalties and interest on the underpayment will be 
determined based on the amount of relief from the underpayment to which 
the requesting spouse is entitled. If a requesting spouse remains 
liable for a portion of the underpayment after application of Sec.  
1.6015-4, the requesting spouse is not eligible for relief under 
section 6015 for the penalties and interest related to that portion of 
the underpayment. Cf. Weiler v. Commissioner, T.C. Memo. 2003-255 (a 
requesting spouse is not relieved from liabilities for penalties and 
interest resulting from items attributable to the requesting spouse). 
This position is consistent with how the IRS currently treats relief 
from penalties and interest after determining the relief from the 
underlying tax. See IRM 25.15.3.4.1.1(2) (Revised 03/08/2013).
    If an assessed deficiency is paid in full, or the unpaid tax 
reported on the joint return is later paid in full, but penalties and 
interest remain unpaid, under the proposed rule, a requesting spouse 
may be considered for relief from the penalties and interest under 
section 6015. The determination of relief from the penalties and 
interest is made by considering whether the requesting spouse would be 
entitled to relief from the underlying tax and not considering the 
penalties and interest as if they were separate items. A requesting 
spouse may be relieved from the penalties and interest even if relief 
in the form of a refund of the payments made on the underlying tax is 
barred (for example, Sec.  1.6015-1(k)(2) (no refunds allowed under 
Sec.  1.6015-3) or Sec.  1.6015-1(k)(4) (refund barred by the 
limitations of sections 6511 or 6512(b)).
    Proposed Sec.  1.6015-1(n) provides attribution rules for a portion 
of an understatement or deficiency relating to the disallowance of 
certain items. Specifically, Sec.  1.6015-1(n) addresses items that are 
otherwise not erroneous items, but are disallowed solely due to the 
increase of adjusted gross income (or modified adjusted gross income) 
over a phase-out threshold as a result of an erroneous item 
attributable to the nonrequesting spouse. One common example of this is 
when the nonrequesting spouse's omitted income increases adjusted gross 
income so that the Earned Income Tax Credit (EITC) is phased out and 
the understatement or deficiency partially represents the recapture of 
the refunded EITC.
    Under proposed Sec.  1.6015-1(n), the understatement or deficiency 
related to the item disallowed due to the increase to adjusted gross 
income will be attributable to the spouse whose erroneous item caused 
the increase to adjusted gross income, unless the evidence shows that a 
different result is appropriate. If the increase to adjusted gross 
income is the result of erroneous items of both spouses, the item 
disallowed due to the increase to adjusted gross income will be 
attributable to the requesting spouse in the same ratio as the amount 
of the item

[[Page 72653]]

or items attributable to the requesting spouse over the total amount of 
the items that resulted in the increase to adjusted gross income. 
Corresponding rules are proposed to be added to Sec. Sec.  1.6015-2(b) 
and 1.6015-3(c)(2)(i) to provide that a requesting spouse knows or has 
reason to know of the item disallowed due to the increase in adjusted 
gross income if the requesting spouse knows or has reason to know of 
the erroneous item or items that resulted in the increase to adjusted 
gross income. Likewise, for purposes of proposed Sec.  1.6015-4 and 
Rev. Proc. 2013-34, a requesting spouse knows or has reason to know of 
the portion of an understatement or deficiency related to an item 
attributable to the nonrequesting spouse under Sec.  1.6015-1(n) if the 
requesting spouse knows or has reason to know of the nonrequesting 
spouse's erroneous item or items that resulted in the increase to 
adjusted gross income.
    Examples are provided to illustrate how this rule applies in 
situations involving the EITC, the phase-out of itemized deductions, 
and the application of the alternative minimum tax. This rule, however, 
can be implicated in other situations. It should be noted that this 
proposed rule would not apply if there is another reason for 
disallowing the item, such as no qualifying child for the EITC, no 
substantiation for a claimed deduction, or the lack of any basis in law 
or fact for the deduction. In this situation, the normal attribution 
rules applicable to Sec. Sec.  1.6015-2, 1.6015-3, and 1.6015-4 apply.
    Proposed Sec.  1.6015-1(o) provides a definition of abuse for 
purposes of proposed Sec. Sec.  1.6015-2(b) and 1.6015-3(c)(vi). The 
definition of abuse is taken directly from Rev. Proc. 2013-34, section 
4.03(2)(c)(iv).

2. Section 1.6015-2

    Only minor substantive changes are proposed to current Sec.  
1.6015-2. The proposed amendments reorganize the section, update 
references, and provide clarification where needed. Proposed Sec.  
1.6015-2(a) changes the language in the existing regulations, ``the 
requesting spouse elects the application of this section,'' to ``the 
requesting spouse requests relief'' consistent with the discussion 
earlier in this preamble. The definition of ``understatement'' in 
current Sec.  1.6015-2(b) is removed as the definition will now be 
located in proposed Sec.  1.6015-1(h)(7). Current Sec.  1.6015-2(c) is 
redesignated as proposed Sec.  1.6015-2(b), adds additional facts and 
circumstances from Rev. Proc. 2013-34 to consider in determining 
whether a requesting spouse had reason to know, adds a knowledge rule 
to correspond to proposed Sec.  1.6015-1(n) as discussed earlier in 
this preamble, and clarifies, consistent with the changes made in Rev. 
Proc. 2013-34, that abuse or financial control by the nonrequesting 
spouse will result in the requesting spouse being treated as not having 
knowledge or reason to know of the items giving rise to the 
understatement. Current Sec.  1.6015-2(d) is redesignated as proposed 
Sec.  1.6015-2(c) and provides an updated cross-reference to the most 
recent revenue procedure providing the criteria to be used in 
determining equitable relief, Rev. Proc. 2013-34. Current Sec.  1.6015-
2(e)(1) is redesignated as proposed Sec.  1.6015-2(d)(1) and the word 
``only'' is removed to clarify the rule. Current Sec.  1.6015-2(e)(2) 
is redesignated as proposed Sec.  1.6015-2(d)(2) and the example is 
updated to use more current years and dates, but otherwise no 
substantive changes were made.

3. Section 1.6015-3

    Among other clarifying changes, these regulations propose to 
clarify the difference between full and partial relief under section 
6015(c) and to reflect case law regarding the tax benefit rule of 
section 6015(d)(3)(B), including new examples.
    Proposed Sec.  1.6015-3(a) provides a revised heading and a cross-
reference to the definition of deficiency in proposed Sec.  1.6015-
1(h)(8).
    Section 6015(g)(3) provides that no credit or refund is allowed as 
a result of an allocation of a deficiency under section 6015(c). 
Proposed Sec.  1.6015-3(c)(1) clarifies the existing regulations and 
provides that whether relief is available to a requesting spouse under 
section 6015(c) is not dependent on the availability of credit or 
refund. Thus, if a requesting spouse is eligible to allocate the entire 
deficiency to the nonrequesting spouse, the requesting spouse has 
received full relief even if the requesting spouse made payments on the 
deficiency and is not entitled to a refund of those payments because of 
section 6015(g)(3). Further, the requesting spouse is not eligible to 
be considered for relief (and a refund) under section 6015(f) for the 
amount of any paid liability because a prerequisite to relief under 
section 6015(f) is the unavailability of relief under section 6015(b) 
or (c) and the spouse received full relief under section 6015(c). A 
requesting spouse may still be considered for relief (and a refund) 
under section 6015(b) for the amount of any paid liability. If a 
requesting spouse only receives partial relief (for example, some part 
of the deficiency is still allocated to the requesting spouse), then 
the requesting spouse may be considered for relief under section 
6015(f) for the portion of the deficiency allocable to the requesting 
spouse. A new sentence is added to Sec.  1.6015-3(c)(2)(i) to add a 
knowledge rule to correspond to proposed Sec.  1.6015-1(n), which, as 
discussed earlier in this preamble, provides an attribution rule for 
the portion of a deficiency relating to the disallowance or reduction 
of an otherwise valid item solely due to the increase in AGI as a 
result of the disallowance of an erroneous item.
    Proposed Sec.  1.6015-3(d)(2)(i) illustrates that, under the tax 
benefit rule of section 6015(d)(3)(B), the amount of an erroneous item 
allocated to a requesting spouse may increase or decrease depending 
upon the tax benefit to the requesting and nonrequesting spouses. Thus, 
these proposed regulations adopt the holding of Hopkins v. 
Commissioner, 121 T.C. 73 (2003) (a requesting spouse was entitled to 
relief from her own item under the tax benefit rule of section 
6015(d)(3)(B) because the nonrequesting spouse was the only person who 
reported income on the returns, and therefore, the only one who 
received any tax benefit from the item). In addition, five new examples 
have been added to Sec.  1.6015-3(d)(5) to provide additional guidance 
on the application of the tax benefit rule of Sec.  1.6015-3(d)(2)(i). 
Example 7 demonstrates the application of Sec.  1.6015-3(d)(2)(i)(B), 
which provides that each spouse's hypothetical separate taxable income 
may need to be determined to properly apply the tax benefit rule. 
Example 8 demonstrates the holding in Hopkins by showing that a 
requesting spouse's allocated portion of a deficiency will be decreased 
when the nonrequesting spouse receives a tax benefit from the item. 
Example 9 demonstrates the allocation of a liability when the erroneous 
item is a loss from a jointly-owned investment. Example 10 demonstrates 
how the tax benefit rule works when the erroneous item is a loss from a 
jointly-owned investment. In addition, Example 11 is added to 
demonstrate how the rule in Sec.  1.6015-3(d)(2)(ii) regarding fraud 
works.
    Section 1.6015-3(c)(2)(iv) currently provides that the requesting 
spouse's joint ownership (with the nonrequesting spouse) of the 
property that resulted in the erroneous item is a factor that may be 
relied upon in demonstrating that the requesting spouse had actual 
knowledge of the item. Under the tax benefit rule of Sec.  1.6015-
3(d)(2)(i), as stated earlier in this preamble, a requesting spouse can 
be relieved of liability for the requesting

[[Page 72654]]

spouse's own erroneous item if the item is otherwise allocable in full 
or in part to the nonrequesting spouse under section 6015(d). 
Therefore, proposed Sec.  1.6015-3(c)(2)(iv) revises the current 
regulations to clarify that the requesting spouse's separate ownership 
of the erroneous item is also a factor that may be relied upon in 
demonstrating that the requesting spouse had actual knowledge of the 
item. Current Sec.  1.6015-3(c)(2)(v) is redesignated as proposed Sec.  
1.6015-3(c)(2)(vi) and the discussion of community property in current 
Sec.  1.6015-3(c)(iv) is removed and is now located in proposed Sec.  
1.6015-3(c)(2)(v). Proposed Sec.  1.6015-3(c)(vi) is revised to 
clarify, consistent with the changes made in Rev. Proc. 2013-34, that 
abuse or financial control by the nonrequesting spouse will result in 
the requesting spouse being treated as not having actual knowledge of 
the items giving rise to the understatement.

4. Section 1.6015-4

    No substantive changes are proposed to current Sec.  1.6015-4. The 
proposed amendments update references and provide a clarifying change 
consistent with proposed Sec.  1.6015-3(c)(1), which provides the rule 
that refunds are not allowed under section 6015(c).
    Proposed Sec.  1.6015-4(a) was revised to provide a cross-reference 
to the definitions of unpaid tax, understatement, and deficiency in 
proposed Sec. Sec.  1.6015-1(h)(6), (h)(7), and (h)(8).
    Proposed Sec.  1.6015-4(b) was revised to provide a cross-reference 
to proposed Sec.  1.6015-1(k)(3). The paragraph also clarifies that if 
only partial relief is available under Sec.  1.6015-3, then relief may 
be considered under Sec.  1.6015-4 for the portion of the deficiency 
for which the requesting spouse remains liable.
    Proposed Sec.  1.6015-4(c) replaces the citation to Rev. Proc. 
2000-15 (2000-1 CB 447) with Rev. Proc. 2013-34, which revised the 
factors used in determining if the requesting spouse is eligible for 
equitable relief under section 6015(f).

5. Section 1.6015-5

    A notice of proposed rulemaking (REG-132251-11) was published in 
the Federal Register (78 FR 49242) on August 13, 2013. Those 
regulations proposed changes to Sec.  1.6015-5 to remove the two-year 
deadline for taxpayers to file requests for equitable relief under 
section 6015(f), and other changes related to the time and manner for 
requesting relief. These proposed regulations revise the notice of 
proposed rulemaking published on August 13, 2013 to add an effective 
date provision.

6. Section 1.6015-6

    The changes in proposed Sec.  1.6015-6 are intended to update the 
current regulations to reflect existing practice and guidance. Proposed 
Sec.  1.6015-6(a)(1) replaces the term ``election'' under Sec.  1.6015-
2 or Sec.  1.6015-3 with ``request for relief.'' Proposed Sec.  1.6015-
6(a)(2) includes a reference to Rev. Proc. 2003-19 (2003-1 CB 371), 
which provides guidance on a nonrequesting spouse's right to appeal a 
preliminary determination to IRS Appeals.

7. Section 1.6015-7

    Section 1.6015-7 was revised to reflect the amendments to section 
6015(e) in the 2006 Act that, as noted earlier in this preamble, 
conferred jurisdiction on the United States Tax Court to review the 
IRS's denial of relief in cases in which taxpayers requested equitable 
relief under section 6015(f), without regard to whether the IRS has 
determined a deficiency. Prior to these amendments, the United States 
Tax Court lacked jurisdiction to review section 6015(f) determinations 
if no deficiency had been determined. The amendments apply to any 
liability for tax that arose on or after December 20, 2006, and any 
liability for tax that arose before December 20, 2006, but remained 
unpaid as of that date. Proposed Sec.  1.6015-7(c) revises the current 
regulations to reflect the changes to the restrictions on collection 
and corresponding tolling of the collection statute under section 6502. 
On versions of the Form 8857 dated before June 2007 a requesting spouse 
could request relief under just one subsection of section 6015. For 
claims for relief that were made under sections 6015(b) and (c) (and 
the corresponding Sec. Sec.  1.6015-2 and 1.6015-3), the IRS is 
prohibited from collecting against the requesting spouse (and the 
collection statute is tolled) beginning on the date the claim is filed. 
For requests for relief made solely under section 6015(f) (and the 
corresponding Sec.  1.6015-4), the IRS is prohibited from collecting 
against the requesting spouse (and the collection statute is tolled) 
only for liabilities arising on or after December 20, 2006, or 
liabilities arising before December 20, 2006, but remaining unpaid as 
of that date. For requests for relief made solely under Sec.  1.6015-4, 
the restrictions on collection and tolling of the collection statute do 
not start until December 20, 2006, for any requests filed before that 
date, assuming the tax remained unpaid as of that date. The 
restrictions on collection and tolling of the collection statute start 
as of the date the request is filed for requests filed on or after 
December 20, 2006.

8. Section 1.66-4

    The only changes to the existing regulations under section 66 are 
non-substantive changes. Proposed Sec.  1.66-4(a)(3) and (b) replace 
the citation to Rev. Proc. 2000-15 with Rev. Proc. 2013-34, which 
revised the factors used in determining whether a requesting spouse is 
eligible for equitable relief under section 66(c).

9. Effective and Applicability Dates

    Additionally, the effective and applicability date sections in the 
regulations under section 66 and section 6015 are reorganized to move 
the effective and applicability date sections within the specific 
regulation to which the dates apply. The separate effective date 
sections under Sec. Sec.  1.66-5 and 1.6015-9 are removed.

Special Analyses

    Certain IRS regulations, including this one, are exempt from the 
requirements of Executive Order 12866, as supplemented and reaffirmed 
by Executive Order 13563. Therefore, a regulatory impact assessment is 
not required. It has also been determined that section 553(b) of the 
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to 
these regulations. In addition, because the regulations do not impose a 
collection of information on small entities, the Regulatory Flexibility 
Act (5 U.S.C. chapter 6) does not apply. Accordingly, a regulatory 
flexibility analysis is not required under the Regulatory Flexibility 
Act (5 U.S.C. chapter 6). Pursuant to section 7805(f) of the Code, this 
notice of proposed rulemaking has been submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on its 
impact on small business.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in the preamble under the ``Addresses'' 
heading. Treasury and the IRS request comments on all aspects of the 
proposed regulations. All comments will be available at 
www.regulations.gov or upon request. A public hearing will be scheduled 
if requested in writing by any person that timely submits written 
comments. If a public hearing is scheduled, notice of the date, time, 
and place for the public hearing will be published in the Federal 
Register.

[[Page 72655]]

Drafting Information

    The principal author of these regulations is Nancy Rose of the 
Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by adding the 
following entries in numerical order as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.66-1 also issued under 26 U.S.C. 66(c).
    Section 1.66-2 also issued under 26 U.S.C. 66(c).
    Section 1.66-3 also issued under 26 U.S.C. 66(c).
* * * * *
0
Par. 2. Section 1.66-1 is amended by adding paragraph (d) to read as 
follows:


Sec.  1.66-1  Treatment of community income.

* * * * *
    (d) Effective/applicability date. This section is applicable 
beginning July 10, 2003.
0
Par. 3. Section 1.66-2 is amended by adding paragraph (e) to read as 
follows:


Sec.  1.66-2  Treatment of community income where spouses live apart.

* * * * *
    (e) Effective/applicability date. This section is applicable 
beginning July 10, 2003.
0
Par. 4. Section 1.66-3 is amended by adding paragraph (d) to read as 
follows:


Sec.  1.66-3  Denial of the Federal income tax benefits resulting from 
the operation of community property law where spouses not notified.

* * * * *
    (d) Effective/applicability date. This section is applicable 
beginning July 10, 2003.
0
Par. 5. Section 1.66-4 is amended by:
    1. The last sentence of paragraphs (a)(3) and (b) are revised.
    2. Paragraph (l) is added and reserved.
    3. Paragraph (m) is added.
    The revisions and additions read as follows:


Sec.  1.66-4  Request for relief from the Federal income tax liability 
resulting from the operation of community property law.

    (a) * * *
    (3) * * * Factors relevant to whether it would be inequitable to 
hold a requesting spouse liable, more specifically described under the 
applicable administrative procedure issued under section 66(c) (Rev. 
Proc. 2013-34 (2013-2 CB 397) (See Sec.  601.601(d)(2) of this 
chapter), or other applicable guidance published by the Secretary), are 
to be considered in making a determination under this paragraph (a).
    (b) * * * Factors relevant to whether it would be inequitable to 
hold a requesting spouse liable, more specifically described under the 
applicable administrative procedure issues under section 66(c) (Rev. 
Proc. 2013-34 (2013-2 CB 397) (See Sec.  601.601(d)(2) of this 
chapter), or other applicable guidance published by the Secretary), are 
to be considered in making a determination under this paragraph (b).
* * * * *
    (l) [Reserved]
    (m) Effective/applicability date. This section is applicable 
beginning July 10, 2003, except that paragraphs (a)(3) and (b) of this 
section will be applicable on the date of publication of a Treasury 
Decision adopting these rules as final regulations in the Federal 
Register.


Sec.  1.66-5  [Removed]

0
Par. 6. Section 1.66-5 is removed.
0
Par. 7. Section 1.6015-0 is amended by:
0
1. In Sec.  1.6015-1, entries for paragraphs (e)(1), (e)(2), (e)(3), 
(e)(4), (e)(5), (h)(6), (h)(7), (h)(8), (k), (l), (m), (n), (o), and 
(p) are added and the entry for paragraph (h)(5) is revised.
0
2. In Sec.  1.6015-2, entries for paragraphs (b), (c), (d), and (e) are 
revised and the entries for paragraphs (e)(1) and (e)(2) are removed.
0
3. In Sec.  1.6015-3, entries for paragraphs (a) and (c)(2)(v) are 
revised and entries for paragraphs (c)(2)(vi), (d)(2)(i)(A), 
(d)(2)(i)(B), and (e) are added.
0
4. In Sec.  1.6015-4, an entry for paragraph (d) is added.
0
5. In Sec.  1.6015-5, an entry for paragraph (d) is added.
0
6. In Sec.  1.6015-6, an entry for paragraph (d) is added.
0
7. In Sec.  1.6015-7, entries for paragraphs (c)(1) and (c)(4)(iii) are 
revised and entries for paragraphs (c)(1)(i), (c)(1)(ii), (c)(1)(iii), 
and (d) are added.
0
8. In Sec.  1.6015-8, an entry for paragraph (d) is added.
0
9. Section 1.6015-9 entry is removed.
    The revisions and additions read as follows:


Sec.  1.6015-0  Table of contents.

* * * * *
Sec.  1.6015-1 Relief from joint and several liability on a joint 
return.
* * * * *
    (e) * * *
    (1) In general.
    (2) Situations in which relief under Sec.  1.6015-3 will not be 
considered to have been at issue in the prior proceeding.
    (3) Meaningful participation.
    (4) Examples.
    (5) Collateral estoppel.
* * * * *
    (h) * * *
    (5) Request for relief.
    (6) Unpaid tax and underpayment.
    (7) Understatement.
    (8) Deficiency.
* * * * *
    (k) Credit or refund.
    (1) In general.
    (2) No credit or refund allowed under Sec.  1.6015-3.
    (3) No circumvention of Sec. Sec.  1.6015-1(k)(2) and 1.6015-
3(c)(1).
    (4) Limitations on credit or refund.
    (5) Requesting spouse limited to credit or refund of payments 
made by the requesting spouse.
    (l) [Reserved]
    (m) Penalties and interest.
    (n) Attribution of understatement or deficiency resulting from 
an increase to adjusted gross income.
    (1) In general.
    (2) Examples.
    (o) Abuse by nonrequesting spouse.
    (p) Effective/applicability date.

Sec.  1.6015-2 Relief from liability applicable to all qualifying 
joint filers.
* * * * *
    (b) Know or reason to know.
    (c) Inequity.
    (d) Partial relief.
    (1) In general.
    (2) Example.
    (e) Effective/applicability date.

Sec.  1.6015-3 Allocation of deficiency for individuals who are no 
longer married, are legally separated, or are not members of the 
same household.

    (a) Allocation of deficiency.
* * * * *
    (c) * * *
    (2) * * *
    (v) Actual knowledge and community property.
    (vi) Abuse exception.
* * * * *
    (d) * * *
    (2) * * *
    (i) * * *
    (A) In general.
    (B) Calculating separate taxable income and tax due.
    (e) Effective/applicability date.

Sec.  1.6015-4 Equitable relief.

    (d) Effective/applicability date.

Sec.  1.6015-5 Time and manner for requesting relief.
* * * * *
    (d) Effective/applicability date.


[[Page 72656]]


Sec.  1.6015-6 Nonrequesting spouse's notice and opportunity to 
participate in administrative proceedings.
* * * * *
    (d) Effective/applicability date.

Sec.  1.6015-7 Tax Court review.
* * * * *
    (c) * * *
    (1) Restrictions on collection.
    (i) Restrictions on collection for requests for relief made on 
or after December 20, 2006.
    (ii) Restrictions on collection for requests for relief made 
before December 20, 2006.
    (iii) Rules for determining the period of the restrictions on 
collection.
* * * * *
    (4) * * *
    (iii) Assessment to which the request relates.
    (d) Effective/applicability date.
Sec.  1.6015-8 Applicable liabilities.
* * * * *
    (d) Effective/applicability date.
0
Par. 8. Section 1.6015-1 is amended by:
0
1. Paragraphs (a)(2), (e), (h)(1), and (h)(5) are revised.
0
2. The last three sentences of paragraph (h)(4) are removed.
0
3. Paragraphs (h)(6), (7), and (8) and (k) are added.
0
4. Paragraph (l) is added and reserved.
0
5. Paragraphs (m), (n), (o), and (p) are added.
    The revisions and additions read as follows:


Sec.  1.6015-1  Relief from joint and several liability on a joint 
return.

    (a) * * *
    (2) A requesting spouse may submit a single request for relief 
under Sec. Sec.  1.6015- 2, 1.6015-3, and 1.6015-4. Upon submitting a 
request for relief, the IRS will consider whether relief is appropriate 
under Sec. Sec.  1.6015-2 and 1.6015-3 and, to the extent relief is 
unavailable under both of those provisions, under Sec.  1.6015-4. 
Equitable relief under Sec.  1.6015-4 is available only to a requesting 
spouse who fails to qualify for relief under Sec. Sec.  1.6015-2 and 
1.6015-3.
* * * * *
    (e) Res judicata and collateral estoppel--(1) In general. A 
requesting spouse is barred from relief from joint and several 
liability under section 6015 by res judicata for any tax year for which 
a court of competent jurisdiction has rendered a final decision on the 
requesting spouse's tax liability if relief under section 6015 was at 
issue in the prior proceeding, or if the requesting spouse meaningfully 
participated in that proceeding and could have raised the issue of 
relief under section 6015.
    (2) Situations in which relief under Sec.  1.6015-3 will not be 
considered to have been at issue in the prior proceeding. Relief under 
Sec.  1.6015-3 will not be considered to have been at issue in a prior 
proceeding if the requesting spouse only raised the issue of relief 
under section 6015 in general and did not specify under which 
subsection relief was being requested, and the requesting spouse was 
not eligible for relief under Sec.  1.6015-3 during the prior 
proceeding because the requesting spouse was not divorced, widowed, or 
legally separated, or had been a member of the same household as the 
nonrequesting spouse during the prior 12 months.
    (3) Meaningful participation. A requesting spouse meaningfully 
participated in the prior proceeding if the requesting spouse was 
involved in the proceeding so that the requesting spouse could have 
raised the issue of relief under section 6015 in that proceeding. 
Meaningful participation is a facts and circumstances determination. 
Absent abuse as set forth in paragraph (i) of this section, the 
following is a nonexclusive list of acts to be considered in making the 
facts and circumstances determination: Whether the requesting spouse 
participated in the IRS Appeals process while the prior proceeding was 
docketed; whether the requesting spouse participated in pretrial 
meetings; whether the requesting spouse participated in discovery; 
whether the requesting spouse participated in settlement negotiations; 
whether the requesting spouse signed court documents, such as a 
petition, a stipulation of facts, motions, briefs, or any other 
documents; whether the requesting spouse participated at trial (for 
example, the requesting spouse was present or testified at the prior 
proceeding); and whether the requesting spouse was represented by 
counsel in the prior proceeding. No one act necessarily determines the 
outcome. The degree of importance of each act varies depending on the 
requesting spouse's facts and circumstances.
    (i) Notwithstanding the fact that a requesting spouse performed any 
of the acts listed in paragraph (e)(3) of this section in the prior 
proceeding, the requesting spouse will not be considered to have 
meaningfully participated in the prior proceeding if the requesting 
spouse establishes that the requesting spouse performed the acts 
because the nonrequesting spouse abused (as described in paragraph (o) 
of this section) or maintained control over the requesting spouse, and 
the requesting spouse did not challenge the nonrequesting spouse for 
fear of the nonrequesting spouse's retaliation.
    (ii) A requesting spouse did not meaningfully participate in a 
prior proceeding if, due to the effective date of section 6015, relief 
under section 6015 was not available in that proceeding.
    (iii) In a case petitioned from a statutory notice of deficiency 
under section 6213, the fact that the requesting spouse did not have 
the ability to effectively contest the underlying deficiency is 
irrelevant for purposes of determining whether the requesting spouse 
meaningfully participated in the court proceeding for purposes of 
paragraph (e)(1) of this section.
    (4) Examples. The following examples illustrate the rules of this 
paragraph (e):

    Example 1. In a prior court proceeding involving a petition from 
a notice of deficiency related to a joint income tax return, H and W 
were still married and filed a timely joint petition to the United 
States Tax Court. The petition stated that W was entitled to relief 
under section 6015 without specifying under which subsection she was 
requesting relief. Before trial, H negotiates with the IRS Chief 
Counsel attorney and settles the case. W did not meaningfully 
participate. A stipulated decision was entered that did not mention 
relief under section 6015. One year later W files a request for 
relief under section 6015. While W did not meaningfully participate 
in the prior court proceeding, because relief under section 6015 was 
at issue in that case, res judicata applies except with respect to 
relief under Sec.  1.6015-3. Because W did not specify that she was 
requesting relief under Sec.  1.6015-3, and W was not eligible to 
request relief under that section because she was still married to 
the nonrequesting spouse throughout the court proceeding, relief 
under Sec.  1.6015-3 is not considered to have been at issue in that 
case. Thus, W is not barred by res judicata from raising relief 
under Sec.  1.6015-3 in a later case. However, any later claim from 
W requesting relief under Sec.  1.6015-2 or Sec.  1.6015-4 would be 
barred by res judicata.
    Example 2. Same facts as in Example 1 of this paragraph (e)(4) 
except that H and W are divorced at the time the petition was filed. 
Because W was eligible to request relief under Sec.  1.6015-3 as she 
was divorced from H, relief under Sec.  1.6015-3 is considered to be 
at issue in the prior court proceeding and W is barred by res 
judicata from raising relief under Sec.  1.6015-3 in a later case. 
Thus, any later claim from W requesting relief under any subsection 
of section 6015 would be barred by res judicata.
    Example 3. The IRS issued a notice of deficiency to H and W 
determining a deficiency on H and W's joint income tax return based 
on H's Schedule C business. H and W timely filed a petition in the 
United States Tax Court. W signed the petition and numerous other 
documents, participated in discussions regarding the case with the 
IRS Chief Counsel attorney, and ultimately agreed to a settlement of 
the case. W could have raised any issue, but W did not have any 
access to H's records regarding his

[[Page 72657]]

Schedule C business, over which H maintained exclusive control. 
Relief under section 6015 was never raised in the court proceeding. 
If W were to later file a request for relief under section 6015, W's 
claim would be barred by res judicata. Considering these facts and 
circumstances, W meaningfully participated in the prior court 
proceeding regarding the deficiency. The fact that W could not have 
effectively contested the underlying deficiency because she had no 
access to H's Schedule C records is not relevant to the 
determination of whether W meaningfully participated. Instead the 
meaningful participation exception looks to W's involvement in the 
prior court proceeding and her ability to raise relief under section 
6015 as a defense.
    Example 4. Same facts as Example 3 of this paragraph (e)(4), 
except that W's participation in discussions with the IRS Chief 
Counsel attorney were clearly controlled by H, and W was fearful of 
H when she agreed to settle the case. In this situation, her 
involvement in the prior proceeding would not be considered 
meaningful participation because W was able to establish that H 
maintained control over her and that she did not challenge H for 
fear of the H's retaliation. If W were to later file a request for 
relief under section 6015, her claim would not be barred by res 
judicata.
    Example 5. In March 2014, the IRS issued a notice of deficiency 
to H and W determining a deficiency on H and W's joint income tax 
return for tax year 2011. H and W timely filed a pro se petition in 
the United States Tax Court for redetermination of the deficiency. W 
signed the petition, but otherwise, H handled the entire litigation, 
from discussing the case with the IRS Chief Counsel attorney to 
agreeing to a settlement of the case. Relief under section 6015 was 
never raised. W signed the decision document that H had agreed to 
with the IRS Chief Counsel attorney. If W were to later file a claim 
requesting relief under section 6015, W's claim would not be barred 
by res judicata. Considering these facts and circumstances, W's 
involvement in the prior court proceeding regarding the deficiency 
did not rise to the level of meaningful participation.
    Example 6. Same facts as in Example 5 of this paragraph (e)(4) 
except that W also participated in settlement negotiations with the 
IRS Chief Counsel attorney that resulted in the decision document 
entered in the case. Considering these facts and circumstances--
signing the petition and the decision document, along with 
participating in the negotiations that led to the settlement 
reflected in the decision document--W meaningfully participated in 
the prior court proceeding regarding the deficiency because W could 
have raised relief under section 6015. Any later claim from W 
requesting relief under section 6015 would be barred by res 
judicata.
    Example 7.  In a prior court proceeding involving a petition 
from a notice of deficiency, H and W hired counsel, C, to represent 
them in the United States Tax Court. W agreed to C's representation, 
but otherwise, only H met and communicated with C about the case. C 
signed and filed the petition, discussed the case with the IRS Chief 
Counsel attorney, and agreed to a settlement of the case after 
discussing it with H. Relief under section 6015 was never raised. C 
signed the decision document on behalf of H and W. If W were to 
later file a claim requesting relief under section 6015, W's claim 
would not be barred by res judicata. Even though W was represented 
by counsel in the prior court proceeding regarding the deficiency, 
considering all the facts and circumstances, W's involvement in the 
prior court proceeding did not rise to the level of meaningful 
participation.
    Example 8. In a prior court proceeding involving a petition from 
a notice of deficiency, H did not sign the petition or other court 
documents, participate in the Appeals or Counsel settlement 
negotiations, attend pretrial meetings, or hire separate counsel. H 
did, however, attend the trial and testify. Considering these facts 
and circumstances, H's participation in the trial is sufficient to 
establish that H meaningfully participated in the prior court 
proceeding regarding the deficiency because H's participation 
provided H with a definite opportunity to raise relief under section 
6015 in that proceeding. Any later claim from H requesting relief 
under section 6015 would be barred by res judicata.
    Example 9. The IRS issued a joint notice of deficiency to H and 
W determining a deficiency on H and W's joint income tax return 
based on H's Schedule C business. Only W timely filed a petition in 
the United States Tax Court. W conceded the deficiency shortly 
before trial and signed a decision document. W did not raise relief 
under section 6015. If W were to later file a claim requesting 
relief under section 6015, W's claim would be barred by res 
judicata. Because W was the only petitioner in the prior court 
proceeding, W's participation in that proceeding was meaningful 
participation.

    (5) Collateral estoppel. Any final decisions rendered by a court of 
competent jurisdiction regarding issues relevant to section 6015 are 
conclusive, and the requesting spouse may be collaterally estopped from 
relitigating those issues.
* * * * *
    (h) Definitions--(1) Requesting spouse. A requesting spouse is an 
individual who filed a joint income tax return and requests relief from 
Federal income tax liability arising from that return under Sec.  
1.6015-2, Sec.  1.6015-3, or Sec.  1.6015-4.
* * * * *
    (5) Request for relief. A qualifying request under Sec.  1.6015-2, 
Sec.  1.6015-3, or Sec.  1.6015-4 is the first timely request for 
relief from joint and several liability for the tax year for which 
relief is sought. A qualifying request also includes a requesting 
spouse's second request for relief from joint and several liability for 
the same tax year under Sec.  1.6015-3 when the additional 
qualifications of paragraphs (h)(5)(i) and (ii) of this section are 
met--
    (i) The requesting spouse did not qualify for relief under Sec.  
1.6015-3 at the time of the first request solely because the 
qualifications of Sec.  1.6015-3(a) were not satisfied; and
    (ii) At the time of the second request, the qualifications for 
relief under Sec.  1.6015-3(a) were satisfied.
    (6) Unpaid tax and underpayment. Unpaid tax and underpayment for 
purposes of Sec.  1.6015-4 means the balance due shown on the joint 
return, reduced by the tax paid with the joint return. The balance due 
shown on the joint return is determined after application of the 
credits for tax withheld under section 31, any amounts paid as 
estimated income tax, any amounts paid with an extension of time to 
file, or any other credits applied against the total tax reported on 
the return. Tax paid with the joint return includes a check or money 
order remitted with the return or Form 1040-V, ``Payment Voucher,'' or 
payment by direct debit, credit card, or other commercially acceptable 
means under section 6311. If the joint return is filed on or before the 
last day prescribed for filing under section 6072 (determined without 
regard to any extension of time to file under section 6081), the tax 
paid with the joint return includes any tax paid on or before the last 
day prescribed for payment under section 6151. If the joint return is 
filed after the last day prescribed for filing, the tax paid with the 
joint return includes any tax paid on or before the date the joint 
return is filed. A requesting spouse is not entitled to be considered 
for relief under Sec.  1.6015-4 for any tax paid with the joint return. 
If the tax paid with the joint return completely satisfies the balance 
due shown on the return, then there is no unpaid tax for purposes of 
Sec.  1.6015-4.
    (7) Understatement. The term understatement means the excess of the 
amount of tax required to be shown on the return for the taxable year 
over the amount of the tax imposed which is shown on the return, 
reduced by any rebate (within the meaning of section 6211(b)(2)).
    (8) Deficiency. The term deficiency has the same meaning given to 
that term in section 6211 and Sec.  301.6211-1 of this chapter.
* * * * *
    (k) Credit or refund--(1) In general. Except as provided in 
paragraphs (k)(2) through (5) of this section, a requesting spouse who 
is eligible for relief can receive a credit or refund of payments made 
to satisfy the joint income tax

[[Page 72658]]

liability, whether the liability resulted from an understatement or an 
underpayment.
    (2) No credit or refund allowed under Sec.  1.6015-3. A requesting 
spouse is not entitled to a credit or refund of any payments made on 
the joint income tax liability as a result of allocating the deficiency 
under Sec.  1.6015-3. See section 6015(g)(3) and Sec.  1.6015-3(c)(1).
    (3) No circumvention of Sec. Sec.  1.6015-1(k)(2) and 1.6015-
3(c)(1). Section 1.6015-4 may not be used to circumvent the limitation 
of Sec.  1.6015-3(c)(1) (such as, no refunds under Sec.  1.6015-3). 
Therefore, relief is not available under this section to obtain a 
credit or refund of liabilities already paid, for which the requesting 
spouse would otherwise qualify for relief under Sec.  1.6015-3. For 
purposes of determining whether the requesting spouse qualifies for 
relief under Sec.  1.6015-3, the fact that a refund was barred by 
section 6015(g)(2) and paragraph (k)(2) of this section does not mean 
that the requesting spouse did not receive full relief. A requesting 
spouse is entitled to full relief under Sec.  1.6015-3 if the 
requesting spouse was eligible to allocate the deficiency in full to 
the nonrequesting spouse.
    (4) Limitations on credit or refund. The availability of credit or 
refund is subject to the limitations provided by sections 6511 and 
6512(b). Generally the filing of Form 8857, ``Request for Innocent 
Spouse Relief,'' will be treated as the filing of a claim for credit or 
refund even if the requesting spouse does not specifically request a 
credit or refund. The amount allowable as a credit or refund, assuming 
the requesting spouse is eligible for relief, includes payments made 
after the filing of the Form 8857, as well as payments made within the 
applicable look-back period provided by section 6511(b).
    (5) Requesting spouse limited to credit or refund of payments made 
by the requesting spouse. A requesting spouse is only eligible for a 
credit or refund of payments to the extent the requesting spouse 
establishes that he or she provided the funds used to make the payment 
for which he or she seeks a credit or refund. Thus, a requesting spouse 
is not eligible for a credit or refund of payments made by the 
nonrequesting spouse. A requesting spouse is also generally not 
eligible for a credit or refund of joint payments made with the 
nonrequesting spouse. A requesting spouse, however, may be eligible for 
a credit or refund of the requesting spouse's portion of an overpayment 
from a joint return filed with the nonrequesting spouse that was offset 
under section 6402 to the spouses' joint income tax liability, to the 
extent that the requesting spouse can establish his or her contribution 
to the overpayment.
    (l) [Reserved]
    (m) Penalties and interest. Generally, a spouse who is entitled to 
relief under Sec.  1.6015-2, Sec.  1.6015-3, or Sec.  1.6015-4 is also 
entitled to relief from related penalties, additions to tax, additional 
amounts, and interest (collectively, penalties and interest). Penalties 
and interest, however, are not separate erroneous items (as defined in 
paragraph (h)(4) of this section) from which a requesting spouse can be 
relieved separate from the tax. Rather relief from penalties and 
interest related to an understatement or deficiency will generally be 
determined based on the proportion of the total erroneous items from 
which the requesting spouse is relieved. For penalties that relate to a 
particular erroneous item, see Sec.  1.6015-3(d)(4)(iv)(B). Penalties 
and interest on an underpayment are also not separate items from which 
a requesting spouse may obtain relief under Sec.  1.6015-4. Relief from 
penalties and interest on the underpayment will be determined based on 
the amount of relief from the underpayment to which the requesting 
spouse is entitled. If the underlying tax liability (whether an 
assessed deficiency or an underpayment) was paid in full after the 
joint return was filed but penalties and interest remain unpaid, the 
requesting spouse may be relieved from the penalties and interest if 
the requesting spouse is entitled to relief from the underlying tax. 
The fact that the requesting spouse is entitled to relief from the 
underlying tax but is not entitled to a refund because of Sec.  1.6015-
1(k) does not prevent the requesting spouse from being relieved from 
liability for the penalties and interest.
    (n) Attribution of understatement or deficiency resulting from an 
increase to adjusted gross income--(1) In general. Any portion of an 
understatement or deficiency relating to the disallowance of an item 
(or increase to an amount of tax) separately listed on an individual 
income tax return solely due to the increase of adjusted gross income 
(or modified adjusted gross income or other similar phase-out 
thresholds) as a result of an erroneous item solely attributable to the 
nonrequesting spouse will also be attributable to the nonrequesting 
spouse unless the evidence shows that a different result is 
appropriate. If the increase to adjusted gross income is the result of 
an erroneous item(s) of both the requesting and nonrequesting spouses, 
the item disallowed (or increased tax) due to the increase to adjusted 
gross income will be attributable to the requesting spouse in the same 
ratio as the amount of the item or items attributable to the requesting 
spouse over the total amount of the items that resulted in the increase 
to adjusted gross income.
    (2) Examples. The following examples illustrate the rules of this 
paragraph (n):

    Example 1. H and W file a joint Federal income tax return. After 
applying withholding credits there is a tax liability of $500. Based 
on the earned income reported on the return and the number of 
qualifying children, H and W are entitled to an Earned Income Tax 
Credit (EITC) in the amount of $1,500. The EITC satisfies the $500 
in tax due and H and W receive a refund in the amount of $1,000. 
Later the IRS concludes that H had additional unreported income, 
which increased the tax liability on the return to $1,000 and 
resulted in H and W's EITC being reduced to zero due to their 
adjusted gross income exceeding the maximum amount. The IRS 
determines a deficiency in the amount of $2,000--$1,500 of which 
relates to the EITC and $500 of which relates to H's erroneous 
item--the omitted income. If W requests relief under section 6015, 
the entire $2,000 deficiency is attributable to H because the EITC 
was disallowed solely due to the increase of adjusted gross income 
as a result of H's omitted income. W satisfies the attribution 
factor of Sec.  1.6015-2(a)(2) and the threshold condition in 
section 4.01(7) of Rev. Proc. 2013-34 with respect to the entire 
deficiency. Under Sec.  1.6015-3(d)(4)(ii), the portion of the 
deficiency related to the disallowance of the EITC is initially 
allocated to H.
    Example 2. H and W file a joint Federal income tax return 
reporting a total tax liability of $22,000. Later the IRS concludes 
that H had additional unreported income in the amount of $20,000, 
which increased H and W's adjusted gross income and their 
alternative minimum taxable income. As a result, H and W now owe the 
Alternative Minimum Tax (AMT). The IRS determines a deficiency in 
the amount of $5,250--$250 of which relates to H and W's AMT 
liability as determined under section 55 and $5,000 of which relates 
to the increase in H and W's section 1 income tax liability. If W 
requests relief under section 6015, the entire $5,250 deficiency is 
attributable to H because H and W owe the AMT solely due to H's 
erroneous item--the omitted income. W satisfies the attribution 
factor of Sec.  1.6015-2(a)(2) and the threshold condition in 
section 4.01(7) of Rev. Proc. 2013-34 with respect to the entire 
deficiency. Under Sec.  1.6015-3(d)(4)(ii), the portion of the 
deficiency related to the AMT is initially allocated to H.
    Example 3. H and W file a joint Federal income tax return 
reporting itemized deductions on Schedule A, ``Itemized 
Deductions,'' in the amount of $50,000. Later the IRS concludes that 
$10,000 of W's expenses reported on her Schedule C, ``Profit or Loss 
From Business,'' were not allowable, which increased H and W's 
adjusted gross income. As a result, H and W's itemized expenses are 
reduced to $45,000 as their adjusted gross income exceeded the 
phase-out amount. The IRS determines a deficiency in the amount of 
$5,000. If H requests relief

[[Page 72659]]

under section 6015, the entire $5,000 deficiency is attributable to 
W because the itemized deductions were reduced solely due to the 
increase of adjusted gross income as a result of W's erroneous 
item--the Schedule C expenses. H satisfies the attribution factor of 
Sec.  1.6015-2(a)(2) and the threshold condition in section 4.01(7) 
of Rev. Proc. 2013-34 with respect to the entire deficiency. Under 
Sec.  1.6015-3(d)(2)(iv), the portion of the deficiency related to 
the disallowance of the Schedule A deductions is initially allocated 
to W.
    Example 4. H and W file a joint Federal income tax return 
reporting itemized deductions on Schedule A in the amount of 
$50,000. Later the IRS concludes that H had additional unreported 
income in the amount of $4,000 and W had additional unreported 
income in the amount of $6,000, which increased H and W's adjusted 
gross income. As a result, H and W's itemized expenses are reduced 
to $45,000 as their adjusted gross income exceeded the phase-out 
amount. The IRS determines a deficiency in the amount of $6,000--
$1,500 of which relates to H's erroneous item, $2,500 of which 
relates to W's erroneous item, and $2,000 of which relates to the 
reduced itemized deductions. Assuming the conditions for relief 
under section 6015 are otherwise satisfied, the $2,500 deficiency 
from W's omitted income is attributable to W and the $1,500 
deficiency from H's omitted income is attributable to H. Because the 
increase to adjusted gross income as a result of both H and W's 
erroneous items reduced the itemized deductions, the portion of the 
deficiency related to the disallowed itemized deductions is 
partially attributable to both H and W. Of the $2,000 deficiency 
from the disallowed itemized deductions, $800 is attributable to H 
because 40 percent ($4,000/$10,000) of the items that resulted in 
the increase to adjusted gross income are attributable to H, and 
$1,200 is attributable to W because 60 percent ($6,000/$10,000) of 
the items that resulted in the increase to adjusted gross income are 
attributable to W. If both H and W requested relief the most H could 
be relieved from is $3700, the amount attributable to W ($2500 + 
$1200), and the most W could be relieved from is $2300, the amount 
attributable to H ($1500 + $800).

    (o) Abuse by the nonrequesting spouse. Abuse comes in many forms 
and can include physical, psychological, sexual, or emotional abuse, 
including efforts to control, isolate, humiliate, and intimidate the 
requesting spouse, or to undermine the requesting spouse's ability to 
reason independently and be able to do what is required under the tax 
laws. All the facts and circumstances are considered in determining 
whether a requesting spouse was abused. The impact of a nonrequesting 
spouse's alcohol or drug abuse is also considered in determining 
whether a requesting spouse was abused. Depending on the facts and 
circumstances, abuse of the requesting spouse's child or other family 
member living in the household may constitute abuse of the requesting 
spouse.
    (p) Effective/applicability date. This section will be applicable 
on the date of publication of a Treasury decision adopting these rules 
as final regulations in the Federal Register.
0
Par. 9. Section 1.6015-2 is amended by:
0
1. Paragraph (a) introductory text is revised.
0
2. Paragraph (b) is removed.
0
3. Paragraphs (c), (d), and (e) are redesignated as paragraphs (b), 
(c), and (d).
0
4. Newly designated paragraph (b) is revised.
0
5. The last sentence of newly designated paragraph (c) is revised.
0
6. Newly designated paragraph (d) is revised.
0
7. Paragraph (e) is added.
    The revisions and addition read as follows:


Sec.  1.6015-2  Relief from liability applicable to all qualifying 
joint filers.

    (a) In general. A requesting spouse may be relieved from joint and 
several liability for tax (including related additions to tax, 
additional amounts, penalties, and interest) from an understatement for 
a taxable year under this section if the requesting spouse requests 
relief in accordance with Sec. Sec.  1.6015-1(h)(5) and 1.6015-5, and--
* * * * *
* * * * *
    (b) Knowledge or reason to know. A requesting spouse has knowledge 
or reason to know of an understatement if he or she actually knew of 
the understatement, or if a reasonable person in similar circumstances 
would have known of the understatement. For rules relating to a 
requesting spouse's actual knowledge, see Sec.  1.6015-3(c)(2). All of 
the facts and circumstances are considered in determining whether a 
requesting spouse had reason to know of an understatement. The facts 
and circumstances that are considered include, but are not limited to, 
the nature of the erroneous item and the amount of the erroneous item 
relative to other items; any deceit or evasiveness of the nonrequesting 
spouse; the couple's financial situation; the requesting spouse's 
educational background and business experience; the extent of the 
requesting spouse's participation in the activity that resulted in the 
erroneous item; the requesting spouse's involvement in business or 
household financial matters; whether the requesting spouse failed to 
inquire, at or before the time the return was signed, about items on 
the return or omitted from the return that a reasonable person would 
question; any lavish or unusual expenditures compared with past 
spending levels; and whether the erroneous item represented a departure 
from a recurring pattern reflected in prior years' returns (for 
example, omitted income from an investment regularly reported on prior 
years' returns). A requesting spouse has knowledge or reason to know of 
the portion of an understatement related to an item attributable to the 
nonrequesting spouse under Sec.  1.6015-1(n) if the requesting spouse 
knows or has reason to know of the nonrequesting spouse's erroneous 
item or items that resulted in the increase to adjusted gross income. 
Depending on the facts and circumstances, if the requesting spouse was 
abused by the nonrequesting spouse (as described in Sec.  1.6015-1(o)), 
or the nonrequesting spouse maintained control of the household 
finances by restricting the requesting spouse's access to financial 
information, and because of the abuse or financial control, the 
requesting spouse was not able to challenge the treatment of any items 
on the joint return for fear of the nonrequesting spouse's retaliation, 
the requesting spouse will be treated as not having knowledge or reason 
to know of the items giving rise to the understatement. If, however, 
the requesting spouse involuntarily executed the return, the requesting 
spouse may choose to establish that the return was signed under duress. 
In such a case, Sec.  1.6013-4(d) applies.
    (c) * * * For guidance concerning the criteria to be used in 
determining whether it is inequitable to hold a requesting spouse 
jointly and severally liable under this section, see Rev. Proc. 2013-34 
(2013-2 CB 397), or other guidance published by the Treasury and IRS 
(see Sec.  601.601(d)(2) of this chapter).
    (d) Partial relief--(1) In general. If a requesting spouse had no 
knowledge or reason to know of a portion of an erroneous item, the 
requesting spouse may be relieved of the liability attributable to that 
portion of that item, if all other requirements are met with respect to 
that portion.
    (2) Example. The following example illustrates the rules of this 
paragraph (d):

    Example.  H and W are married and file their 2014 joint income 
tax return in March 2015. In April 2016, H is convicted of 
embezzling $2 million from his employer during 2014. H kept all of 
his embezzlement income in an individual bank account, and he used 
most of the funds to support his gambling habit. H and W had a joint 
bank account into which H and W deposited all of their reported 
income. Each month during

[[Page 72660]]

2014, H transferred an additional $10,000 from the individual 
account to H and W's joint bank account. Although H paid the 
household expenses using this joint account, W regularly received 
the bank statements relating to the account. W did not know or have 
reason to know of H's embezzling activities. W did, however, know or 
have reason to know of $120,000 of the $2 million of H's 
embezzlement income at the time she signed the joint return because 
that amount passed through the couple's joint bank account and she 
regularly received bank statements showing the monthly deposits from 
H's individual account. Therefore, W may be relieved of the 
liability arising from $1,880,000 of the unreported embezzlement 
income, but she may not be relieved of the liability for the 
deficiency arising from $120,000 of the unreported embezzlement 
income of which she knew and had reason to know.

    (e) Effective/applicability date. This section will be applicable 
on the date of publication of a Treasury decision adopting these rules 
as final regulations in the Federal Register.
0
Par. 10. Section 1.6015-3 is amended by:
0
1. The paragraph heading and first sentence of paragraph (a) are 
revised.
0
2. Paragraphs (c)(1) and (c)(2)(iv) are revised.
0
3. A sentence is added at the end of paragraph (c)(2)(i).
0
4. Paragraph (c)(2)(v) is redesignated as paragraph (c)(2)(vi) and 
paragraph (c)(2)(v) is added.
0
5. Newly redesignated paragraph (c)(2)(vi) is revised.
0
6. Paragraphs (d)(2)(i) and (d)(5) introductory text are revised.
0
7. In paragraph (d)(5), Examples 7, 8, 9, 10, and 11 are added.
0
8. Paragraph (e) is added.
    The revisions and additions read as follows:


Sec.  1.6015-3  Allocation of deficiency for individuals who are no 
longer married, are legally separated, or are not members of the same 
household.

    (a) Allocation of deficiency. A requesting spouse may allocate a 
deficiency (as defined in Sec.  1.6015-1(h)(8)) if, as defined in 
paragraph (b) of this section, the requesting spouse is divorced, 
widowed, or legally separated, or has not been a member of the same 
household as the nonrequesting spouse at any time during the 12-month 
period ending on the date the request for relief is filed. * * *
    (c) * * * (1) No refunds. Although a requesting spouse may be 
eligible to allocate the deficiency to the nonrequesting spouse, 
refunds are not authorized under this section. Refunds of paid 
liabilities for which a requesting spouse was entitled to allocate the 
deficiency under this section may be considered under Sec.  1.6015-2 
but not under Sec.  1.6015-4. See Sec.  1.6015-1(k)(3).
    (2) * * * (i) * * * A requesting spouse has actual knowledge of the 
portion of an understatement related to an item attributable to the 
nonrequesting spouse under Sec.  1.6015-1(n) and allocable to the 
nonrequesting spouse under paragraph (d) of this section if the 
requesting spouse has actual knowledge of the nonrequesting spouse's 
erroneous item or items that resulted in the increase to adjusted gross 
income.
* * * * *
    (iv) Factors supporting actual knowledge. To demonstrate that a 
requesting spouse had actual knowledge of an erroneous item at the time 
the return was signed, the Internal Revenue Service (IRS) will consider 
all the facts and circumstances, including but not limited to, whether 
the requesting spouse made a deliberate effort to avoid learning about 
the item to be shielded from liability; whether the erroneous item 
would have been allocable to the requesting spouse but for the tax 
benefit rule in paragraph (d)(2)(i) of this section; and whether the 
requesting spouse and the nonrequesting spouse jointly owned the 
property that resulted in the erroneous item. These factors, together 
with all other facts and circumstances, may demonstrate that the 
requesting spouse had actual knowledge of the item. If the requesting 
spouse had actual knowledge of an erroneous item, the portion of the 
deficiency with respect to that item will not be allocated to the 
nonrequesting spouse.
    (v) Actual knowledge and community property. A requesting spouse 
will not be considered to have had an ownership interest in an item 
based solely on the operation of community property law. Rather, a 
requesting spouse who resided in a community property state at the time 
the return was signed will be considered to have had an ownership 
interest in an item only if the requesting spouse's name appeared on 
the ownership documents, or there otherwise is an indication that the 
requesting spouse asserted dominion and control over the item. For 
example, assume H and W live in State A, a community property state. 
After their marriage, H opens a bank account in his name. Under the 
operation of the community property laws of State A, W owns one-half of 
the bank account. Assuming there is no other indication that she 
asserted dominion and control over the item, W does not have an 
ownership interest in the account for purposes of this paragraph 
(c)(2)(v) because she does not hold the account in her name.
    (vi) Abuse exception. Depending on the facts and circumstances, if 
the requesting spouse was abused by the nonrequesting spouse (as 
described in Sec.  1.6015-1(o)), or the nonrequesting spouse maintained 
control of the household finances by restricting the requesting 
spouse's access to financial information, and because of the abuse or 
financial control, the requesting spouse was not able to challenge the 
treatment of any items on the joint return for fear of the 
nonrequesting spouse's retaliation, the limitation on the requesting 
spouse's ability to allocate the deficiency because of actual knowledge 
will not apply. The requesting spouse will be treated as not having 
knowledge of the items giving rise to the deficiency. If, however, the 
requesting spouse involuntarily executed the return, the requesting 
spouse may choose to establish that the return was signed under duress. 
In such a case, Sec.  1.6013-4(d) applies.
* * * * *
    (d) * * *
    (2) * * *
    (i) Benefit on the return--(A) In general. An erroneous item that 
would otherwise be allocated to one spouse is allocated to the second 
spouse to the extent that the second spouse received a tax benefit on 
the joint return and the first spouse did not receive a tax benefit. An 
erroneous item under this paragraph can be allocated to a requesting 
spouse or a nonrequesting spouse, but only a spouse who requests relief 
under this section may allocate the deficiency. A spouse who does not 
request relief under section 6015 remains fully liable for the 
deficiency. An allocation from a requesting spouse to a nonrequesting 
spouse reduces the amount for which a requesting spouse remains liable 
while an allocation from a nonrequesting spouse to a requesting spouse 
increases the amount for which a requesting spouse remains liable.
    (B) Calculating separate taxable income and tax due. Under section 
6015(d)(3)(A), the items giving rise to the deficiency must be 
allocated to each spouse in the same manner as the items would have 
been allocated if the spouses had filed separate returns. In 
determining whether a spouse received a tax benefit from the item, it 
may be necessary to calculate each spouse's hypothetical separate 
return taxable income, determined without regard to the erroneous 
items, and taking into consideration adjusted gross income,

[[Page 72661]]

allowable deductions and losses, and allowable credits against tax.
* * * * *
    (5) Examples. The following examples illustrate the rules of this 
paragraph (d). In each example, assume that the requesting spouse or 
spouses qualify to allocate the deficiency, that a request under 
section 6015 was timely made, and that the deficiency remains unpaid. 
In addition, unless otherwise stated, assume that neither spouse 
actually knew of the erroneous items allocable to the other spouse. The 
examples are as follows:
* * * * *
    Example 7. Calculation of tax benefit based on taxable income. 
(i) On their joint Federal income tax return for tax year 2009, H 
reports $60,000 of wage income; W reports $25,000 of wage income; 
and H and W report joint interest income of $2,000 and joint 
ordinary income from investments in the amount of $6,000. In 
addition, H and W properly deduct $30,000 for their two personal 
exemptions and itemized deductions, and W erroneously reports a loss 
from her separate investment in a partnership in the amount of 
$20,000. On May 3, 2012, a $5,000 deficiency is assessed with 
respect to their 2009 joint return. W dies in November 2012. H 
requests innocent spouse relief. The deficiency on the joint return 
results from a disallowance of all of W's $20,000 loss (which is 
initially allocable to W).
    (ii) After taking all sources of income and all allowable 
deductions into consideration, H's separate taxable income is 
$49,000 and W's separate taxable income is $14,000, calculated as 
follows:

------------------------------------------------------------------------
                                                 H               W
------------------------------------------------------------------------
Wages...................................         $60,000         $25,000
Interest Income.........................           1,000           1,000
Investment Income.......................           3,000           3,000
                                         -------------------------------
    Adj. Gross Income...................          64,000          29,000
Exemptions and Deductions...............        (15,000)        (15,000)
                                         -------------------------------
    Taxable Income......................          49,000          14,000
W's Disallowed Loss.....................  ..............        (20,000)
                                                         ---------------
    Tax Benefit Not Used by W...........  ..............         (6,000)
Tax Benefit to W........................  ..............        (14,000)
Tax Benefit to H........................         (6,000)
------------------------------------------------------------------------

    (iii) As W only used $14,000 of her $20,000 loss from her 
separate investment in a partnership to offset her separate taxable 
income, H benefited from the other $6,000 of the disallowed loss 
used to offset his separate taxable income. Therefore, $14,000 of 
the disallowed $20,000 loss is allocable to W (7/10) and $6,000 of 
the disallowed loss is allocable to H (3/10). H's liability is 
limited to $1,500 (3/10 of the $5,000 deficiency).
    Example 8. Nonrequesting spouse receives a benefit on the joint 
return from the requesting spouse's erroneous item. (i) On their 
joint Federal income tax return for tax year 2008, W reports $40,000 
of wage income and H reports $12,000 of wage income. In addition, H 
and W properly deduct $20,000 for their two personal exemptions and 
itemized deductions, H erroneously deducts a casualty loss in the 
amount of $5,000 related to a loss on his separately held property, 
and W erroneously takes a loss in the amount of $7,000 from an 
investment in a tax shelter. H and W legally separate in 2010, and 
on October 21, 2011, a $2,400 deficiency is assessed with respect to 
their 2008 joint return. H requests innocent spouse relief. The 
deficiency on the joint return results from a disallowance of all of 
H's $5,000 loss and all of W's $7,000 loss (which is allocable to W 
and for which H did not have actual knowledge).
    (ii) The $5,000 casualty loss is initially allocated to H. As 
H's separate taxable income is only $2,000 ($12,000 wage income less 
$10,000--50 percent of the exemptions and itemized deductions), H 
only used $2,000 of his $5,000 casualty loss to offset his separate 
taxable income, and W benefited from the other $3,000 of the 
disallowed loss, which offset a portion of her separate taxable 
income. Therefore, $3,000 of the disallowed loss is allocable to W 
even though the loss is H's item, and $2,000 of the loss is 
allocable to H. The $7,000 tax shelter loss is also allocable to W 
as H did not have knowledge of the facts that made the tax shelter 
item unallowable as a loss. H's allocation percentage is \1/6\ 
($2,000/$12,000) and H's liability is limited to $400 (\1/6\ of 
$2,400 deficiency). The IRS may collect up to $400 from H and up to 
$2,400 from W (although the total amount collected may not exceed 
$2,400).
    (iii) If the IRS could establish that H had knowledge of the 
facts that made the deduction for his casualty loss unallowable, the 
entire $5,000 casualty loss would be allocable to H. H's allocation 
percentage would be \5/12\ ($5,000/$12,000) and H's liability would 
be limited to $1,000 (\5/12\ of $2,400 deficiency).
    (iv) If W also requested innocent spouse relief (and H did not 
have knowledge of the facts that made his loss unallowable), there 
would be no remaining joint and several liability, and the IRS would 
be permitted to collect $400 from H (\1/6\ ($2,000/$12,000) of the 
$2,400 deficiency) and $2,000 (\5/6\ ($10,000/$12,000) of $2,400 
deficiency) from W. If the IRS could establish that W had knowledge 
of the facts that made the deduction for the casualty loss 
unallowable, W would then be liable for the entire $2,400 
deficiency, while H would remain liable for up to $400.
    Example 9. Allocation of liability based on joint erroneous loss 
item. (i) On their joint Federal income tax return for tax year 
2009, H reports $100,000 of wage income and W reports $50,000 of 
wage income. In addition, H and W properly deduct $40,000 for their 
two personal exemptions and itemized deductions, and erroneously 
report a loss in the amount of $50,000 from a jointly-held 
investment in a tax shelter. H and W divorce in 2011, and on August 
14, 2012, a $12,000 deficiency is assessed with respect to their 
2009 joint return. W requests innocent spouse relief. The deficiency 
on the joint return results from a disallowance of all of the 
$50,000 loss.
    (ii) Under paragraph (d)(2)(iv) of this section, in the absence 
of clear and convincing evidence supporting a different allocation, 
an erroneous deduction item related to a jointly-owned investment is 
generally allocated 50 percent to each spouse. Thus, $25,000 of the 
loss is allocated to each spouse. In determining the effect, if any, 
of the tax benefit rule of Sec.  1.6015-1(d)(2)(i), H's separate 
taxable income is $80,000: $100,000 wage income minus $20,000, or 50 
percent of the exemptions and itemized deductions; and W's separate 
taxable income is $30,000: $50,000 minus $20,000. As both H's and 
W's separate taxable income exceeds their allocated share of the 
disallowed loss, no additional amount is allocated between the 
spouses. W's allocation percentage is \1/2\ ($25,000/$50,000) and 
W's liability is limited to $6,000 (\1/2\ of $12,000 deficiency). 
The IRS may collect up to $6,000 from W and up to $12,000 from H 
(although the total amount collected may not exceed $12,000).
    (iii) If the IRS could establish that W had knowledge of the 
facts that made the loss unallowable, both H and W would then remain 
jointly and severally liable for the $12,000 deficiency.
    Example 10. Calculation of tax benefit based on joint erroneous 
item. Assume the same facts as in Example 9 of this paragraph 
(d)(5), except that W's wage income is only $40,000. W's separate 
taxable income would then be only $20,000 ($40,000 wage income minus 
$20,000--50 percent of the exemptions and itemized deductions). W

[[Page 72662]]

would only be able to use $20,000 of the $25,000 loss from the tax 
shelter to offset her separate taxable income. Accordingly, H 
benefited from the other $5,000 of the disallowed loss, which was 
used to offset a portion of his separate taxable income. Therefore, 
$20,000 of the disallowed loss is allocable to W, and $30,000 is 
allocable to H: $25,000 (H's 50 percent of the disallowed loss) plus 
$5,000 (the portion of W's 50 percent that is allocable to H because 
H received a tax benefit). W's allocation percentage is \2/5\ 
($20,000/$50,000) and W's liability is limited to $4,800 (\2/5\ of 
$12,000 deficiency). The IRS may collect up to $4,800 from W and up 
to $12,000 from H (although the total amount collected may not 
exceed $12,000).
    Example 11. Allocation of erroneous item based on fraud of the 
nonrequesting spouse. During 2009, W fraudulently accesses H's 
brokerage account to sell stock that H had separately received from 
an inheritance. W deposits the funds from the sale in a separate 
bank account to which H did not have access. H and W file a joint 
Federal income tax return for tax year 2009. The return did not 
include the income from the sale of the stock. H and W divorce in 
November 2010. The divorce decree states that W committed forgery 
and defrauded H with respect to his brokerage account. The IRS 
commences an audit in March 2011 and determines a deficiency based 
on the omission of the income from the sale of the stock. H requests 
innocent spouse relief. Under paragraph (d)(2)(iii) of this section, 
items of investment income are generally allocated to the spouse who 
owned the investment, which in this case would be H. Under paragraph 
(d)(2)(ii) of this section, however, the IRS may allocate any item 
between the spouses if the IRS determines that the allocation is 
appropriate due to fraud by one or both spouses. The IRS determines 
that W committed fraud with respect to H and as a result it is 
appropriate to allocate the deficiency to W under paragraph 
(d)(2)(ii).

    (e) Effective/applicability date. This section will be applicable 
on the date of publication of a Treasury decision adopting these rules 
as final regulations in the Federal Register.
0
Par. 11. Section 1.6015-4 is revised to read as follows:


Sec.  1.6015-4  Equitable relief.

    (a) A requesting spouse who files a joint return for which an 
understatement or deficiency (as defined by Sec.  1.6015-1(h)(7) and 
(8)) was determined or for which there was unpaid tax (as defined by 
Sec.  1.6015-1(h)(6)), and who does not qualify for full relief under 
Sec.  1.6015-2 or Sec.  1.6015-3, may be entitled to equitable relief 
under this section. The Internal Revenue Service (IRS) has the 
discretion to grant equitable relief from joint and several liability 
to a requesting spouse when, considering all of the facts and 
circumstances, it would be inequitable to hold the requesting spouse 
jointly and severally liable.
    (b) This section may not be used to circumvent the limitation of 
Sec.  1.6015-3(c)(1). Therefore, relief is not available under this 
section to obtain a refund of liabilities already paid, for which the 
requesting spouse would otherwise qualify for relief under Sec.  
1.6015-3. See Sec.  1.6015-1(k)(3). If the requesting spouse is only 
eligible for partial relief under Sec.  1.6015-3 (i.e., some portion of 
the deficiency is allocable to the requesting spouse), then the 
requesting spouse may be considered for relief under this section with 
respect to the portion of the deficiency for which the requesting 
spouse was not entitled to relief.
    (c) For guidance concerning the criteria to be used in determining 
whether it is inequitable to hold a requesting spouse jointly and 
severally liable under this section, see Rev. Proc. 2013-34 (2013-1 IRB 
397), or other guidance published by the Treasury and IRS (see Sec.  
601.601(d)(2) of this chapter).
    (d) Effective/applicability date. This section will be applicable 
on the date of publication of a Treasury decision adopting these rules 
as final regulations in the Federal Register.
0
Par. 12. Section 1.6015-5 is amended by adding paragraph (d) to read as 
follows:


Sec.  1.6015-5.  Time and manner for requesting relief.

* * * * *
    (d) Effective/applicability date. This section will be applicable 
on the date of publication of a Treasury decision adopting these rules 
as final regulations in the Federal Register.
0
Par. 13. Section 1.6015-6 is amended by revising the first sentence of 
paragraph (a)(1), adding a sentence at the end of paragraph (a)(2), and 
adding paragraph (d) to read as follows:


Sec.  1.6015-6  Nonrequesting spouse's notice and opportunity to 
participate in administrative proceedings.

    (a) * * * (1) When the Internal Revenue Service (IRS) receives a 
request for relief under Sec.  1.6015-2, Sec.  1.6015-3, or Sec.  
1.6015-4, the IRS must send a notice to the nonrequesting spouse's last 
known address that informs the nonrequesting spouse of the requesting 
spouse's request for relief. * * *
    (2) * * * For guidance concerning the nonrequesting spouse's right 
to appeal the preliminary determination to IRS Appeals, see Rev. Proc. 
2003-19 (2003-1 CB 371), or other guidance published by the Treasury 
Department and the IRS (see Sec.  601.601(d)(2) of this chapter).
* * * * *
    (d) Effective/applicability date. This section will be applicable 
on the date of publication of a Treasury decision adopting these rules 
as final regulations in the Federal Register.
0
Par. 14. In Sec.  1.6015-7, paragraphs (b), (c)(1), (c)(3), and 
(c)(4)(iii) are revised and paragraph (d) is added to read as follows:


Sec.  1.6015-7  Tax Court review.

* * * * *
    (b) Time period for petitioning the Tax Court. Pursuant to section 
6015(e), the requesting spouse may petition the Tax Court to review the 
denial of relief under Sec.  1.6015-1 within 90 days after the date the 
Internal Revenue Service's (IRS) final determination is mailed by 
certified or registered mail (the 90-day period). If the IRS does not 
mail the requesting spouse a final determination letter within 6 months 
of the date the requesting spouse files a request for relief under 
section 6015, the requesting spouse may petition the Tax Court to 
review the request at any time after the expiration of the 6-month 
period and before the expiration of the 90-day period. The Tax Court 
also may review a request for relief if the Tax Court has jurisdiction 
under another section of the Internal Revenue Code, such as section 
6213(a) or section 6330(d). This paragraph (b) applies to liabilities 
arising on or after December 20, 2006, or arising prior to December 20, 
2006, and remaining unpaid as of that date. For liabilities arising 
prior to December 20, 2006, which were fully paid prior to that date, 
the requesting spouse may petition the Tax Court to review the denial 
of relief as discussed above, but only with respect to denials of 
relief involving understatements under Sec.  1.6015-2, Sec.  1.6015-3, 
or Sec.  1.6015-4.
    (c) Restrictions on collection and suspension of the running of the 
period of limitations--(1) Restrictions on collection--(i) Restrictions 
on collection for requests for relief made on or after December 20, 
2006. Unless the IRS determines that collection will be jeopardized by 
delay, no levy or proceeding in court shall be made, begun, or 
prosecuted against a spouse requesting relief under Sec.  1.6015-2, 
Sec.  1.6015-3, or Sec.  1.6015-4 (except for certain requests for 
relief made solely under Sec.  1.6015-4) for the collection of any 
assessment to which the request relates until the expiration of the 90-
day period described in paragraph (b) of this section, or, if a 
petition is filed with the Tax Court, until the decision of the Tax 
Court becomes final under section 7481. For requests for relief made 
solely under Sec.  1.6015-4, the restrictions on collection only apply 
if the liability arose on or after December 20, 2006, or arose prior to 
December 20, 2006, and remained

[[Page 72663]]

unpaid as of that date. The restrictions on collection begin on the 
date the request is filed.
    (ii) Restriction on collection for requests for relief made before 
December 20, 2006. Unless the IRS determines that collection will be 
jeopardized by delay, no levy or proceeding in court shall be made, 
begun, or prosecuted against a requesting spouse requesting relief 
under Sec.  1.6015-2 or Sec.  1.6015-3 for the collection of any 
assessment to which the request relates until the expiration of the 90-
day period described in paragraph (b) of this section, or if a petition 
is filed with the Tax Court, until the decision of the Tax Court 
becomes final under section 7481. The restrictions on collection begin 
on the date the request is filed with the IRS. For requests for relief 
made solely under Sec.  1.6015-4, the restrictions on collection do not 
begin until December 20, 2006, and only apply with respect to 
liabilities remaining unpaid on or after that date.
    (iii) Rules for determining the period of the restrictions on 
collection. For more information regarding the date on which a decision 
of the Tax Court becomes final, see section 7481 and the regulations 
thereunder. Notwithstanding paragraphs (c)(1)(i) and (ii) of this 
section, if the requesting spouse appeals the Tax Court's decision, the 
IRS may resume collection of the liability from the requesting spouse 
on the date the requesting spouse files the notice of appeal, unless 
the requesting spouse files an appeal bond pursuant to the rules of 
section 7485. Jeopardy under paragraphs (c)(1)(i) and (ii) of this 
section means conditions exist that would require an assessment under 
section 6851 or 6861 and the regulations thereunder.
* * * * *
    (3) Suspension of the running of the period of limitations. The 
running of the period of limitations in section 6502 on collection 
against the requesting spouse of the assessment to which the request 
under Sec.  1.6015-2, Sec.  1.6015-3, or Sec.  1.6015-4 relates is 
suspended for the period during which the IRS is prohibited by 
paragraph (c)(1) of this section from collecting by levy or a 
proceeding in court and for 60 days thereafter. If the requesting 
spouse, however, signs a waiver of the restrictions on collection in 
accordance with paragraph (c)(2) of this section, the suspension of the 
period of limitations in section 6502 on collection against the 
requesting spouse will terminate on the date that is 60 days after the 
date the waiver is filed with the IRS.
    (4) * * *
    (iii) Assessment to which the request relates. For purposes of this 
paragraph (c), the assessment to which the request relates is the 
entire assessment of the understatement or the balance due shown on the 
return to which the request relates, even if the request for relief is 
made with respect to only part of that understatement or balance due.
    (d) Effective/applicability date. This section will be applicable 
on the date of publication of a Treasury decision adopting these rules 
as final regulations in the Federal Register.
0
Par. 15. Section 1.6015-8 is amended by adding paragraph (d) to read as 
follows:


Sec.  1.6015-8  Applicable liabilities.

* * * * *
    (d) Effective/applicability date. This section will be applicable 
on the date of publication of a Treasury decision adopting these rules 
as final regulations in the Federal Register.


Sec.  1.6015-9  [Removed]

0
Par. 16. Section 1.6015-9 is removed.


Sec. Sec.  1.6015-3 and 1.6015-8   [Amended]

0
Par. 17. For each entry in the ``Section'' column remove the language 
in the ``Remove'' column and add the language in the ``Add'' column in 
its place.

------------------------------------------------------------------------
             Section                    Remove                Add
------------------------------------------------------------------------
1.6015-3(c)(4) Example 4 (ii),    Example 5.........  Example 4.
 (iii), (iv), and (v), first
 sentence.
1.6015-3(c)(4) Example 5 (ii),    Example 6.........  Example 5.
 (iii), and (iv), first sentence.
1.6015-8(c) Example 1, fifth      6015(b)...........  6015.
 sentence.
------------------------------------------------------------------------


John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2015-29609 Filed 11-19-15; 8:45 am]
BILLING CODE 4830-01-P