Some clients marry into tax trouble – and then have no clue how to get out. Others are on the cusp of a separation or divorce and want the uncoupling (at least in the eyes of tax authorities) to start ASAP. Few clients who need the IRS tool called “innocent spouse relief” to unshackle themselves from a spouse’s tax mess (either one that spouse brought to the marriage or one they racked up later) seem to know about it. Here’s what to tell such a client about what this relief does and does not cover and what your client will have to prove before they can qualify – as well as how difficult this relief can be to get.

Just How “Hot” Should IRC Section 751 Be?
Tax rules are generally designed with a purpose in mind. Most rules serve to define the tax base and tax rates. Many others serve a behavioral purpose to encourage or discourage certain activities. The focus of this article stems from tax rules that are a combination of favoring certain activity such as generation of capital gains, and a limitation on such gains for certain taxpayers, such as the so-called “hot assets” rule for partners under IRC Section 751, Unrealized Receivables and Inventory Items. While Section 751 has been in the tax law for decades, a new application of it was raised by both the IRS and California FTB. This article summarizes Rawat, TC Memo 2023-14, rev’d, No. 23-1142 (DC Cir., 2024), and FTB Legal Ruling 2022-02, and offers observations on their relevance to tax research and practice.