Probate & Trust Law Section Conference Manual ... - Minnesota CLE

c. Relief is requested by using Form 8857, Request for Innocent Spouse Relief (and
Separation of Liability, and Equitable Relief), or other similar statement signed
under penalties of perjury, within two years of an assessment of additional tax. A
claim may be made prior to assessment, such as during an audit examination.
However, the effect of the election occurs only after there is a deficiency. A
deficiency only arises when the IRS has assessed the tax.
d. Keep in mind the effect of federal or state transferee liability or property laws on
the estate and surviving spouse. It is possible to separate liability for IRS and
Minnesota Department of Revenue purposes, yet still have the estate (or surviving
spouse) remain liable for unpaid taxes and have the property be subject to
collection.
For example, Husband and Wife file their 2009 joint income tax return by April
15, 2010. Husband dies in January 2012, and the estate assets are passed to Wife.
In July 2012, the IRS assesses a deficiency for the 2009 return for tax issues
attributable to Husband. Wife files a request for spousal relief, which is granted,
leaving Husband’s estate solely liable. Due to the estate transfer to Wife, the IRS
may pursue collection against her.
e. Consider the following potential positive and negative factors the IRS may use to
determine whether to grant full or partial relief to a requesting Fiduciary on behalf
of a taxpayer. No single factor is determinative in any particular case. Rather, all
factors will be considered and weighed appropriately.
i. Was the spouse separated (whether legally separated or living apart) or
divorced from the nonrequesting spouse?
ii. Was the spouse abused by the nonrequesting spouse, and did such abuse
amount to duress?
iii. Was the legal obligation for payment of the outstanding tax liability
allocated to either spouse pursuant to a divorce decree or agreement? If it
was allocated to nonrequesting spouse, did the requesting spouse
reasonably believe nonrequesting spouse would pay the liability?
iv. Did the spouse know or have reason to know of the item giving rise to a
deficiency or that the reported liability would be unpaid at the time the
return was signed?
v. Has the spouse significantly benefited (beyond normal support) from the
unpaid liability or items giving rise to the deficiency?
vi. Will the spouse (the estate) experience economic hardship if relief from
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