[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 97-98]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.6015-2  Relief from liability applicable to all qualifying 
joint filers.

    (a) In general. A requesting spouse may be relieved of joint and 
several liability for tax (including additions to tax, penalties, and 
interest) from an understatement for a taxable year under this section 
if the requesting spouse elects the application of this section in 
accordance with Sec. Sec.  1.6015-1(h)(5) and 1.6015-5, and--
    (1) A joint return was filed for the taxable year;
    (2) On the return there is an understatement attributable to 
erroneous items of the nonrequesting spouse;
    (3) The requesting spouse establishes that in signing the return he 
or she did not know and had no reason to know of the understatement; and
    (4) It is inequitable to hold the requesting spouse liable for the 
deficiency attributable to the understatement.
    (b) Understatement. The term understatement has the meaning given to 
such term by section 6662(d)(2)(A) and the regulations thereunder.
    (c) 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; 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; 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; and whether the erroneous item represented a departure from a 
recurring

[[Page 98]]

pattern reflected in prior years' returns (e.g., omitted income from an 
investment regularly reported on prior years' returns).
    (d) Inequity. All of the facts and circumstances are considered in 
determining whether it is inequitable to hold a requesting spouse 
jointly and severally liable for an understatement. One relevant factor 
for this purpose is whether the requesting spouse significantly 
benefitted, directly or indirectly, from the understatement. A 
significant benefit is any benefit in excess of normal support. Evidence 
of direct or indirect benefit may consist of transfers of property or 
rights to property, including transfers that may be received several 
years after the year of the understatement. Thus, for example, if a 
requesting spouse receives property (including life insurance proceeds) 
from the nonrequesting spouse that is beyond normal support and 
traceable to items omitted from gross income that are attributable to 
the nonrequesting spouse, the requesting spouse will be considered to 
have received significant benefit from those items. Other factors that 
may also be taken into account, if the situation warrants, include the 
fact that the requesting spouse has been deserted by the nonrequesting 
spouse, the fact that the spouses have been divorced or separated, or 
that the requesting spouse received benefit on the return from the 
understatement. 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. 2000-15 
(2000-1 C.B. 447), or other guidance published by the Treasury and IRS 
(see Sec.  601.601(d)(2) of this chapter).
    (e) Partial relief--(1) In general. If a requesting spouse had no 
knowledge or reason to know of only 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 (e):

    Example. H and W are married and file their 2004 joint income tax 
return in March 2005. In April 2006, H is convicted of embezzling $2 
million from his employer during 2004. 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 2004, 
H transferred an additional $10,000 from the individual account to H and 
W's joint bank account. W paid the household expenses using this joint 
account, and regularly received the bank statements relating to the 
account. W had no knowledge or reason to know of H's embezzling 
activities. However, W did have knowledge and 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. 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.

[T.D. 9003, 67 FR 47285, July 18, 2002]