LINE ITEMS.

No Pension for Wife No. 1

* A couple was married for 26 years, during which time the husband was covered by his employer's qualified pension plan. The couple divorced, and the subsequent property settlement did not cover his pension benefits. The husband remarried. Eleven years later, he retired and began receiving a pension from his former employer. When he died, his second wife continued to receive half of the pension.

Upon the death of her ex-husband, the first wife filed suit and requested the court to issue a Qualified Domestic Relations Order (QDRO) that recognized her as the beneficiary of her former husband's pension.

The court denied her request. It held that because she failed to obtain a QDRO prior to her former husband's retirement, his second wife was irrevocably entitled to the pension benefits. (Rheba Hawthorne Franklin Rivers v. Central and South West Corp., 5th Cir. 9-7-99.)

IRS Forces Early Exit

* A taxpayer owed back taxes, but had only enough assets to pay half of the outstanding balance.

Although the taxpayer was vested in his employer's pension plan, he decided against using his pension to pay the taxes he owed. He told the IRS he intended to wait until reaching normal retirement age before using the benefits.

The IRS collection agent working on the case felt the taxpayer was being uncooperative and asked if the IRS could elect early retirement "on behalf of" the taxpayer.

In a legal memorandum, an IRS senior technical reviewer concluded the service could levy and collect taxes on retirement benefits when a taxpayer is eligible for early retirement. According to the reviewer, the IRS can make such an election for the taxpayer even though the retirement would result in a substantially reduced benefit (ILM 199936041).

Agents Ruled Out of Bounds

* Some revenue officers were making taxpayers file delinquent returns directly with them until a tax practitioner challenged the practice and won. According to the IRS, revenue officers have the authority to request hand-delivered delinquent returns, but they can't make taxpayers file the returns directly with them. The Internal Revenue Code gives all taxpayers the right to mail their returns to the appropriate service center (ILM 199933039).

IRS Reveals Source

* An informant provided information to the IRS in exchange for a percentage of the taxes collected as a result of his tips. When his identity became known, one of the taxpayers he had informed on sued him. The informant felt since the IRS had disclosed his identity it should pay for his defense in the suit. Unfortunately for hint, the Court of Federal Claims disagreed. (Billy W. Jarvis v. United States, Fed. Cl. 8-16-99).

No Communication Without Representation

* In IRB 1999-40, the IRS outlined situations in which appeals officers and other service employees are not allowed to engage in "ex parte" communications (communications without the taxpayer or a representative being present). The communications are barred if they compromise or appear to compromise the appeals officer's unbiased and independent review of a taxpayer's case.

--Michael Lynch, CPA, Esq., professor of tax accounting at Bryant College, Smithfield, Rhode Island.