In the recent decision of Zaheen v. Commissioner, T.C. Memo. 2026-7, the United States Tax Court addressed the complexities of equitable relief under Internal Revenue Code section 6015(f). The case highlights the significant weight the Court places on substantiation of spousal abuse and financial control when evaluating a requesting spouse’s eligibility for relief from joint and several liability. For tax professionals, the opinion provides a critical examination of how the "reason to know" standard interacts with the exceptions provided in Revenue Procedure 2013-34, particularly when the underlying income technically originates from the requesting spouse’s assets.

Factual Background

The petitioner, Dr. Asia Zaheen, is a physician who was married to the intervenor, Kamran Ehsan, an electrical engineer. In 2019, the tax year at issue, the couple jointly owned Zaheen Medical Center, though Dr. Zaheen was the sole titleholder of the real property due to impending divorce concerns. Despite Dr. Zaheen being the primary earner and the licensed physician, Mr. Ehsan exercised total domination over the family’s finances and the medical practice’s business operations,.

The record established a pattern of severe abuse. The Court noted that Mr. Ehsan "subjected Dr. Zaheen to various forms of abuse," including physical strangulation, sexual abuse, and threats against their children. Furthermore, Mr. Ehsan "exerted financial control over Dr. Zaheen’s medical practice," controlling bank accounts to her exclusion and paying her a salary despite her ownership status.

The deficiency arose from a specific series of financial transactions. In 2017, the couple established the "KME Investment Trust." In January 2019, $257,907 was withdrawn from Dr. Zaheen’s Merrill Lynch section 401(k) account and deposited into the Trust. This initial rollover was nontaxable. However, shortly thereafter, $257,700 was withdrawn from the Trust to pay down a Home Equity Line of Credit (HELOC) used for the medical practice. This second series of withdrawals was taxable but was omitted from the couple’s joint 2019 Form 1040.

Dr. Zaheen signed the return without reviewing it, having been conditioned by years of abuse to obey Mr. Ehsan’s financial directives. The IRS determined a deficiency of $120,510 and an accuracy-related penalty of $24,102.

The Request for Relief and Judicial Scope

Dr. Zaheen conceded the adjustments to the tax liability but sought relief from joint and several liability. The parties agreed she was not entitled to relief under section 6015(b) or (c), leaving the Court to determine her eligibility for equitable relief under section 6015(f). While the Respondent (Commissioner) conceded that Dr. Zaheen was entitled to relief, Mr. Ehsan intervened to oppose it.

The Court applied a de novo standard of review, considering the trial testimony of both spouses. The Court found Dr. Zaheen’s testimony credible, while finding "most, but not all, of Mr. Ehsan’s testimony to be lacking in credibility, sincerity, and candor".

Threshold Requirements and the Attribution of Income

To qualify for section 6015(f) relief, a taxpayer must satisfy seven threshold requirements outlined in Revenue Procedure 2013-34. The primary point of contention in Zaheen was the seventh requirement: that the tax liability must be attributable to an item of the nonrequesting spouse.

Technically, the income source was Dr. Zaheen’s retirement account. However, the Court applied the exception for abuse and fraud. The Court cited precedent that items are generally attributed "to the spouse who wrongfully reported or claimed them". The Judge ruled that Dr. Zaheen satisfied the exception because Mr. Ehsan "(1) had full control of the marital finances including the retirement account in question, (2) used verbal abuse and threats of physical harm to deter her from inquiring about or participating in his business dealings, and (3) used deceptive tactics to prevent Dr. Zaheen from learning of the full nature of the transaction leading to the deficiency".

Streamlined Determination Analysis

The Court briefly addressed the streamlined determination elements under Rev. Proc. 2013-34, § 4.02. A requesting spouse must establish, among other things, that they "would suffer economic hardship if not granted relief". Because "Dr. Zaheen conceded that she would not suffer economic hardship if not granted relief," the Court proceeded immediately to the full equitable relief analysis.

Full Equitable Relief Analysis

The Court evaluated the claim using the seven nonexclusive factors under Rev. Proc. 2013-34, § 4.03.

Marital Status While Dr. Zaheen had filed a complaint for divorce, the proceedings were pending at the time of trial. Since Massachusetts law "does not recognize legal separation as a marital status," the Court deemed the parties still married, rendering this factor neutral.

Economic Hardship Due to Dr. Zaheen’s concession regarding her ability to pay basic living expenses, this factor was deemed neutral.

Knowledge or Reason to Know This factor requires a nuanced analysis of whether the requesting spouse knew of the item giving rise to the understatement. The Court found that Dr. Zaheen did not have actual knowledge of the taxable withdrawal from the Trust to the HELOC, as she was "essentially unaware of the KME Investment Trust" and had been misled by Mr. Ehsan that the funds would be returned.

Regarding "reason to know," the Court found that Dr. Zaheen, a well-educated physician, "signed the joint 2019 tax return without reviewing it, and therefore did not satisfy her duty of inquiry". Consequently, she constructively had reason to know.

However, the Court applied the critical exception for abuse and financial control. The Court held: "Knowledge may be negated if the nonrequesting spouse abused the requesting spouse or maintained control of the household finances... such that the nonrequesting spouse’s actions prevented the requesting spouse from questioning or challenging the understatement".

Citing specific instances where Mr. Ehsan "strangled her for eating chocolate" and "dragged Dr. Zaheen from the separate room... and threatened to harm the children if she did not have sexual intercourse with him", the Court found the abuse allegations sufficiently specific and substantiated. The Judge concluded, "We find Dr. Zaheen’s allegations of abuse significant enough to negate our finding that she had reason to know of the item giving rise to the understatement". Thus, this factor weighed in favor of relief.

Legal Obligation As no divorce decree or binding agreement existed allocating the tax liability, this factor was neutral.

Significant Benefit The Court analyzed whether Dr. Zaheen received a benefit "in excess of normal support". The funds were used to pay down debt on property Dr. Zaheen solely titled and now owns. Typically, this might weigh against relief. However, the Court noted that Mr. Ehsan "controlled Zaheen Medical Center’s finances... and remitted to Dr. Zaheen only a salary". Furthermore, there was no evidence of a "lavish lifestyle." The Court ruled this factor neutral, noting that the benefit was mitigated by Mr. Ehsan’s control.

Compliance with Income Tax Laws With no evidence presented regarding Dr. Zaheen’s subsequent compliance or noncompliance, this factor was deemed neutral.

Mental or Physical Health The Court found that Dr. Zaheen "was a victim of years of verbal and physical abuse" and suffered stress and depression resulting from the relationship and the divorce proceedings. Mr. Ehsan conceded this point on brief. Consequently, this factor weighed in favor of relief.

Conclusion

After weighing the factors, the Tax Court held that "it would be inequitable to hold Dr. Zaheen liable for the understatement of tax for the year in issue". The decision serves as a reminder to tax practitioners that the "reason to know" standard in innocent spouse cases is not absolute. As the Court stated, "Considering the totality of Dr. Zaheen’s circumstances when the joint returns were filed, we do not believe she could have questioned their accuracy without risking her or her children’s safety". The ruling grants Dr. Zaheen full relief under section 6015(f) regarding both the deficiency and the accuracy-related penalty.

Prepared with assistance from NotebookLM.