David C. Jonson and Estate of Barbara J. Jonson, David C. Jonson, Successor in Interest v. Commissioner of Internal…

Summary

The Tax Court held that Barbara Jonson, whose estate sought relief from deficiencies stemming from disallowed Vulcan Oil Technology tax-shelter losses claimed on the 1981 and 1982 joint returns, is not entitled to relief under any prong of section 6015. She had reason to know of the understatements because she knew of the investment, the claimed deductions, and the tax risks, and the tax savings greatly benefited the family, defeating both the knowledge and equity requirements of section 6015(b). Her husband David, as personal representative, could not elect separate liability treatment under section 6015(c) because Barbara never satisfied the subsection's eligibility requirements while alive — the court reasoned that David became a widower, but Barbara was never widowed. The court also upheld the Commissioner's denial of section 6015(f) equitable relief as neither arbitrary, capricious, nor lacking sound basis in fact.