Tax Court: State Law Protects Spouse Who Has Funds Seized From Joint Account

A Massachusetts woman whose joint bank account was seized by the Internal Revenue Service is entitled to an innocent spouse relief refund because state law says she owns half of the funds in the account, the U.S. Tax Court held Jan. 11 (Minihan v. Commissioner, T.C., No. 26595-09, 138 T.C. No. 1, 1/11/12).

Writing for the court, Judge David Gustafson explained that under Massachusetts law, petitioner Ann Marie Minihan had a half ownership interest in the joint account with her then spouse, John Minihan Jr., and she had a right to bring a post-seizure action under Internal Revenue Code Section 6015(g)(1) to establish her rights in the seized property and seek a judgment against the seizing creditor for the amount of the joint account that she owned.

Gustafson ruled Ann Marie's “refund claim is a post-levy assertion of her rights in the levied property and an avenue for her to recover what may belong to her.” He said “[t]he money in the joint account came from the sale of the couple's long-time marital house, in which they had made a home together during almost two decades of marriage.”