Jacobsen v. Commissioner (7th Cir. 2020), is a taxpayer appeal from the United States Tax Court on whether the petitioner is entitled to any form of innocent spouse relief for a joint tax liability arising from his former wife’s unreported embezzled income. The Tax Court’s decision to deny innocent spouse relief for the tax year of 2011 was based predominantly on its finding that the petitioner had actual knowledge of the unreported income, despite the fact that many other factors weighed in favour of the petitioner. On appeal, the Appeals Court noted that it was a close case, but ultimately affirmed the decision of the Tax Court, finding that the Tax Court did not commit any error or abuse its discretion in denying petitioner any form of innocent spouse relief.

Tax Foresight correctly predicted that the petitioner was not entitled to relief based on several factors including: 

  • Petitioner had actual knowledge of the 2011 embezzlement income 

  • A divorce decree specified that both petitioner and his former spouse would pay half of the 2011 tax liability

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