Cheshire v. IRS

282 F.3d 326
(5th Cir. 2002)

115 TC 183 (1992)
(Reviewed by the Court)

Summary of the Case

A taxpayer may seek relief from his or her spouse’s tax liability if the taxpayer did not know, and should not know, of the income that gave rise to the spouse’s tax liability.

In the Cheshire case, a husband told his wife — incorrectly — that he received a retirement plan distribution that was not taxable because he had rolled it over into an IRA.

In a major decision signed by all 16 judges, the United States Tax Court found that the wife could not claim relief since she had actual knowledge of the distribution. The dissenting opinion held for relief, arguing that a spouse did not know an item on the return was incorrect.

Many commentators have argued the U.S. Tax Court was incorrect, and that the law should be statutorily changed.