BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
Petitioner : FINDINGS OF FACT
: CONCLUSIONS
OF LAW,
v. : AND FINAL DECISION
:
AUDITING
DIVISION OF THE : Appeal No. 89-1070
UTAH STATE TAX COMMISSION :
: Account
No. XXXXX
:
Respondent :
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a formal hearing on
XXXXX. Joseph G. Linford, Presiding
Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner were
XXXXX, and XXXXX, attorney at law.
Present and representing the Respondent were XXXXX, Assistant Attorney
General, and XXXXX of the Auditing Division of the Utah State Tax Commission.
Based
upon the evidence and testimony presented at the hearing, the Tax Commission
hereby makes its:
FINDINGS OF FACT
1.
The tax in question is individual income tax.
2.
The periods in question are the tax years XXXXX through XXXXX.
3.
Petitioner married XXXXX in XXXXX. That
marriage lasted until XXXXX when Petitioner and Ms. XXXXX were divorced. Ms. XXXXX was employed by XXXXX from XXXXX
until XXXXX. While she was employed
there, she received large sums of money from XXXXX which were not reflected on
her W-2 forms. She did not inform
Petitioner of the extra, unreported income and it was not placed in any joint
account maintained by the couple.
Petitioner had no knowledge of this additional income and obtained no benefit
from it.
4.
Petitioner and his ex-wife filed joint income tax returns for the years in
question. However, their financial
affairs were separate throughout the entire marriage. They never had a joint checking or savings account, but always
maintained each of their individual finances separate from the other partner in
the marriage. Petitioner's ex-wife
purchased her own automobile and condominium without the signature and over the
objections of Petitioner. Petitioner believed that the condominium was
purchased with money from the sale of Ms. XXXXX's father's home.
5.
The Petitioner went under a doctor's care in XXXXX for severe depression due to
marital problems. Antidepressants and
sleeping pills were prescribed.
Petitioner presently remains under the care of his physician for
depression.
6.
In the spring of XXXXX, Petitioner's ex-wife retained an attorney without the
Petitioner's knowledge or consent in order to amend their joint tax returns for
the years in question to report the previously unreported income received by
Ms. XXXXX from XXXXX. Petitioner first
learned of this unreported income when he was summoned to the law offices of
Ms. XXXXX's attorney. The attorney told
Petitioner of the unreported income and told Petitioner that he had to sign the
amended tax returns immediately. The
attorney represented to Petitioner that it was urgent that Petitioner do
so. He did not disclose to Petitioner
the potential liabilities associated with executing these amended returns and
no opportunity was afforded Petitioner to consult independent legal
counsel. Petitioner was at this time
under medication for his depression, and under the severe pressure from Ms.
XXXXX's attorney, he signed the returns.
Petitioner indicated by his signature on the returns that he was signing
them under protest by writing the initials "U.P."
6.
Following their divorce, Ms. XXXXX left to live in California where she now
resides.
7.
Petitioner requests that the Tax Commission relieve Petitioner of the
additional taxes assessed because of Ms. XXXXX's unreported income based upon a
federal tax provision which allows this under what is known as the
"Innocent Spouse Doctrine."
8.
Petitioner was granted innocent spouse relief by the Internal Revenue Service
by letter dated XXXXX.
CONCLUSIONS OF LAW
1.
Section 6013(e) of the Internal Revenue Code provides that relief may be
granted from the result of joint and several liability on a joint federal tax
return where the following four conditions are met: (1) a joint return has been
made for the tax year; 2) there is a substantial understatement of tax which is
attributable to income which has been omitted or to grossly erroneous items of
the other spouse on the return; (3) the innocent spouse establishes that in
signing the return he was not aware and did not have reason to be aware of the
substantial understatement; and (4) under all the facts and circumstances, it
would not be equitable to hold the innocent spouse liable for the tax
deficiency which results from the substantial understatement. Relief under this provision extends to the
tax, penalties and interest amounts which are attributable to the
understatement.
2.
Utah Code Ann. §59-10-102 provides that the provisions of the federal income
tax laws are incorporated by reference into those of the state of Utah. The Tax Commission is also granted power to
make whatever "equitable adjustments" are necessary in the interplay
of the state and federal tax laws. Utah Code Ann. §59-10-115.
3.
The Tax Commission finds that innocent spouse relief should be granted,
particularly since such relief has been granted by the Internal Revenue
Service.
DECISION AND ORDER
Based
upon the foregoing, it is the decision and order of the Utah State Tax Commission
that Petitioner's request for innocent spouse relief is granted and that
Petitioner is released from liability for the state income taxes attributable
to Ms. XXXXX's income as reported on the amended joint returns for the years in
question, including any penalty and interest amounts.
DATED
this 29th day of August, 1990.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
ABSENT
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner