Innocent-spouse relief can be granted as to Form 1045.

The Friedmans filed joint tax returns for 1981, 1982 and 1983. On their 1983 return, they reported a $900,000 loss from an equipment-leasing transaction. They filed a joint Form 1045, "Application for Tentative Refund," to carry back the remaining unused $800,000 net operating loss (NOL) from 1983 to 1981 and 1982.

The IRS determined deficiencies for 1981 through 1985, due mostly to disallowance of losses from the same equipment-leasing transaction. The Friedmans later conceded the deficiencies (and penalties) but claimed Mrs. Friedman was entitled to innocent-spouse relief for each year involved. The IRS argued no such relief was available for 1981 and 1982 because there was no "return" on which a deficiency was asserted--only form 1045. (Those years were included in the deficiency only because of the NOL carryback; no deficiency was asserted as to the original joint returns for those years.)

IRC section 6013(e) allows relief from liability for an innocent spouse for substantial understatements attributable to grossly erroneous items of the other spouse on a joint return. The IRS argued form 1045 was merely an application, not a return within the meaning of section 6013(e).

Result: Innocent-spouse relief was available for 1981 and 1982. The Tax Court adopted a broad definition of return for this purpose--one that includes documents, such as the 1045, amending the original return.

Friedman, 97 TC No. 42.