Sleiman v. Commissioner, No. 19155-24 (T.C. May 6, 2026) (oral findings of fact and opinion rendered pursuant to T.C. Rule 152)

For tax professionals representing clients in joint and several liability disputes, the United States Tax Court’s bench opinion in Sleiman v. Commissioner offers critical guidance on two of the most complex areas of I.R.C. § 6015: nominal business ownership and the application of the domestic abuse exception to the "reason to know" standard. This case highlights how de novo judicial review can successfully look past corporate paperwork and nominal listings to identify the true economic and behavioral realities of a marital household.

Background and Procedural Posture

Amal H. Sleiman and Chad Y. Sleiman timely filed a joint federal income tax return for the 2016 tax year. The return reported a nominal total tax liability of $610, which was driven primarily by a substantial claimed loss of $199,068 reported on Schedule E. This loss was passed through from SanUVAire, an S corporation formed in early 2016 by Mr. Sleiman. On SanUVAire's corporate return, Ms. Sleiman was listed as a 31 percent owner, while Mr. Sleiman was listed as a 49 percent owner. Based on this claimed pass-through loss, the couple received a federal tax refund of $57,147.

The Sleimans' marriage was long-troubled, and the couple began living apart in approximately September 2018. In July 2019, the Internal Revenue Service initiated an examination of SanUVAire's corporate returns for tax years 2016, 2017, and 2018, as well as the couple’s joint returns. In June 2020, the taxpayers agreed to an assessment of $56,574 for the 2016 tax year, resulting from the disallowance of the SanUVAire S corporation loss.

Shortly thereafter, in June 2022, Mrs. Sleiman timely filed Form 8857, Request for Innocent Spouse Relief, seeking relief from the joint and several liability under I.R.C. § 6015. The IRS Centralized Cincinnati Innocent Spouse Operation (CCISO) initially granted her partial relief under I.R.C. § 6015(b). Upon an administrative appeal to the IRS’s Office of Appeals, she was granted partial relief under the separation of liability provisions of I.R.C. § 6015(c).

Unsatisfied with receiving only partial relief, Mrs. Sleiman timely filed a petition with the United States Tax Court on April 7, 2025. Mr. Sleiman subsequently filed a Notice of Intervention, becoming a party to the docketed case. In the Tax Court proceedings, counsel for the Commissioner agreed that Ms. Sleiman was indeed entitled to full relief, but contended that such relief should be granted under the equitable standards of I.R.C. § 6015(f). Mr. Sleiman actively opposed the grant of full relief, leading to a trial in Buffalo, New York, before Judge Mark V. Holmes on May 6, 2026.

Standard of Judicial Review

Pursuant to I.R.C. § 6015(e)(7), the Tax Court reviews the Commissioner’s determinations regarding innocent spouse relief under a de novo standard. The scope of this review is based upon the administrative record established at the time of the IRS’s determination, supplemented by any "newly discovered or previously unavailable evidence" received by the Court. In Sleiman, this supplemental evidence was highly consequential, consisting of the trial testimony of both Amal and Chad Sleiman, and a crucial written separation exhibit (Exhibit 18-R).

Statutory Requirements for Section 6015(b) Relief

Although the Commissioner argued that full relief was appropriate under the equitable provisions of I.R.C. § 6015(f), Judge Holmes began his de novo analysis under the statutory framework of I.R.C. § 6015(b). Under § 6015(b)(1) and Treas. Reg. § 1.6015-2(a), a requesting spouse must satisfy five distinct requirements to qualify for relief from an understatement:

A joint return was filed for the taxable year;
There is an understatement of tax on the return attributable to erroneous items of the nonrequesting spouse;
The requesting spouse establishes that in signing the return, he or she did not know and had no reason to know of the understatement;
Taking into account all the facts and circumstances, it is inequitable to hold the requesting spouse liable for the deficiency attributable to the understatement; and
The requesting spouse elects the benefits of the subsection not later than two years after the Secretary has begun collection activities.

In this case, there was no dispute that the first and fifth requirements were met: the Sleimans filed a joint return for 2016, and Mrs. Sleiman timely elected relief within a matter of months after receiving notice of the IRS's collection activities against her separate income. Thus, the Tax Court's analysis focused entirely on attribution, knowledge, and equity.

Attribution of the Erroneous S Corporation Loss

The second statutory condition requires the understatement to be "attributable to erroneous items of one individual filing the joint return" (the nonrequesting spouse). In Sleiman, the IRS identified that the sole understatement arose from the S corporation’s business income adjustments—specifically, the complete disallowance of the large Schedule E pass-through loss from SanUVAire. Because Ms. Sleiman was listed as a 31 percent owner of the entity, the Intervenor argued that a proportionate share of the understatement was attributable to her.

However, Judge Holmes looked beyond the formal ownership listings. The trial testimony revealed that Mr. Sleiman had formed SanUVAire with a third party with whom he was having an adulterous affair. Ms. Sleiman maintained a separate, full-time career and did not participate in the management, operations, or formation of SanUVAire in any capacity. She testified credibly that her listed 31 percent ownership "came as a surprise to her, and she learned about it only during the audit of the couple's 2016 tax return".

In determining that Ms. Sleiman was "not the owner in SanUVAire in any meaningful way," the Court held that she "did not contribute her own resources, her own labor, her own knowledge, or her own capital". This created what Judge Holmes characterized as "a nominee situation". To support this conclusion, the Court drew a direct parallel to the nominal ownership guidelines in Rev. Proc. 2013-34, noting that under the IRS's own administrative rules, a spouse listed nominally on an asset (such as an IRA) can rebut the presumption of ownership by proving a total lack of contribution, administrative execution, or dominion.

Furthermore, Mr. Sleiman failed to present any operating agreement or corporate documentation containing Ms. Sleiman's signature to substantiate her ownership. The Court also received highly credible evidence that Mr. Sleiman had previously "forged her signature on the deed to the family house, trying to transfer it to himself alone". Consequently, the Court discounted Mr. Sleiman's credibility and concluded:

"My conclusion is therefore that it is more likely than not that the erroneous item in this case attributable to Ms. Sleiman's alleged 31 percent ownership of SanUVAire is in fact attributable to Mr. Sleiman alone."

The Knowledge Standard and Judicial Extension of the Abuse Exception

The third condition of I.R.C. § 6015(b)(1) requires the requesting spouse to establish that they "did not know and had no reason to know" of the understatement at the time of signing the return. The Court quickly affirmed that Ms. Sleiman had no actual knowledge of the understatement, given her complete lack of involvement in SanUVAire.

The more difficult hurdle was whether she had "reason to know" under Treas. Reg. § 1.6015-2(c). At the time of signing, Ms. Sleiman was aware that her husband had been laid off and had started a business. However, during most of 2016, Mr. Sleiman had been employed by Cisco, earning "nearly a quarter of $1 million in income". Because his Cisco salary was so substantial, the addition of S corporation losses did not result in an adjusted gross income (AGI) that would put a reasonable person in her position on notice of an understatement. Nevertheless, because she had some high-level awareness that a business existed, Judge Holmes noted that her constructive "reason to know" would normally be a "troubling" issue.

To resolve this issue, the Tax Court examined the domestic abuse exception. Under Treas. Reg. § 1.6015-3(c)(2)(v) (and the parallel guidance in Section 4.03(2)(c)(iv) of Rev. Proc. 2013-34), if a requesting spouse establishes that they were a victim of domestic abuse, and that as a result of the abuse, they "did not challenge the treatment of any items on the return for fear of the nonrequesting spouse's retaliation," the ordinary limitations on relief do not apply.

Judge Holmes expounded on the legal definition of abuse, stating:

"Abuse, of course, is not a bright line concept. Abuse comes in many forms and can include physical, psychological, sexual, or emotional abuse, including efforts to control, isolate, humiliate, and intimidate the requesting spouse or to undermine that spouse's ability to reason independently and be able to do what is required under the tax laws."

The trial and administrative record paint a picture of severe domestic violence and control. The evidence showed that Mr. Sleiman had thrown boiling water at Mrs. Sleiman, burning her arms, and had been physically violent toward their minor children. Amal had obtained a five-year order of protection against him. In addition, Chad had concealed twenty firearms in the family residence, which Ms. Sleiman only discovered when a ceiling collapsed. He also engaged in psychological and emotional abuse, making false reports to her employer alleging that she stole government property or was drunk at work. Furthermore, Mr. Sleiman’s abusive behavior was on display during the trial itself, where he badgered Mrs. Sleiman on cross-examination, demanding she "cut the shit out," which forced the Court to instruct him to "shut up".

Based on these facts, the Court found a persistent, long-standing pattern of severe physical and emotional abuse dating back to 2005. In a significant legal development, Judge Holmes extended the regulatory abuse exception—which is technically framed in Treas. Reg. § 1.6015-3(c)(2)(v) as an exception to the "actual knowledge" bar under § 6015(c)—to the "reason to know" standard under § 6015(b). The Court ruled:

"To the extent that the regulation talks only about overcoming the actual knowledge factor, I am exercising my authority to extend the abuse exception to understatements about which the Petitioner had reason to know. This was the case in which it was very close to duress. The abuse was that severe."

The Inequity Analysis Under Revenue Procedure 2013-34

The fourth condition of I.R.C. § 6015(b)(1) requires that, taking into account all facts and circumstances, it would be inequitable to hold the requesting spouse liable. Under Treas. Reg. § 1.6015-2(d), the Court evaluates inequity by referencing the guidelines of Rev. Proc. 2013-34, Section 4.03. The Court evaluated these factors de novo:

Marital Status

Under Rev. Proc. 2013-34, Section 4.03(2)(a), this factor weighs in favor of relief if the spouses are divorced, widowed, or legally separated. Because the Sleimans were legally separated under New York law, this factor "weighs in favor of relief".

Economic Hardship

Normally, economic hardship is assessed by comparing the requesting spouse's income to 250 percent of the Federal poverty guidelines. If the income exceeds this threshold, the factor is typically neutral unless basic living expenses exceed income. Ms. Sleiman's income exceeded the 250 percent threshold, but her actual monthly basic living expenses exceeded her monthly income. She testified credibly that she had incurred massive legal expenses over an eight-year prolonged divorce proceeding, was forced to borrow money from family members, and had to deplete her retirement savings, which triggered additional withdrawal taxes. Finding that she had no assets available to pay down the tax debt and that basic expenses exceeded her income, the Court "weigh[ed] this as a factor favoring relief".

Knowledge or Reason to Know

As established in the § 6015(b) analysis, Mrs. Sleiman was a victim of severe domestic violence and abuse, preventing her from challenging the tax returns for fear of retaliation. Accordingly, this factor "weighs in favor of granting relief".

Legal Obligation to Pay

Under Rev. Proc. 2013-34, Section 4.03(2)(d), the Court looks to divorce decrees or separation agreements to identify which spouse has the legal obligation to satisfy the liability. During the Tax Court proceedings, Mrs. Sleiman introduced Exhibit 18-R, a written agreement signed by Chad Sleiman on June 23, 2020, and countersigned by Amal, which stated: "Amal is relieved and not responsible for any or all taxes owed for 2016, '17, '18 per the audit and report provided. I'll assume responsibility." The Court held that this was a legally binding agreement obligating Mr. Sleiman to pay the tax liability as between the two of them, meaning this factor "weighs in favor of relief".

Significant Benefit

A significant benefit is any benefit enjoyed by the requesting spouse in excess of normal support. The IRS and the Court both concluded that Ms. Sleiman did not receive any significant benefit from the understated taxes, and the factor was determined to be "neutral".

Compliance with Income Tax Laws

Under Rev. Proc. 2013-34, Section 4.03(2)(f)(i), if a requesting spouse is married but filing separate returns, subsequent compliance is neutral if the taxpayer makes a good faith effort but is unable to fully pay due to a poor economic situation. Because Ms. Sleiman was compliant with her filing obligations but unable to pay due to her post-separation financial hardship, the Court held this factor to be "neutral".

Mental or Physical Health

Under Rev. Proc. 2013-34, Section 4.03(2)(g), this factor weighs in favor of relief if the requesting spouse was in poor physical or mental health at the time the return was filed or when relief was requested. Based on credible testimony, the Court found that Ms. Sleiman suffered from severe mental distress with physical consequences at the time of filing, caused by her husband's ongoing abuse. Thus, this factor "too weighs in favor of relief".

Conclusion and Critical Practice Takeaways

With multiple factors weighing heavily in favor of relief and absolutely "no factors weighing against relief," Judge Holmes concluded that holding Ms. Sleiman liable would be highly inequitable. Accordingly, the Tax Court ruled that on de novo review, Ms. Sleiman was entitled to full innocent spouse relief under I.R.C. § 6015(b), including the right to a refund of any separate payments she made toward the liability.

For practitioners, Sleiman establishes two invaluable precedents:

Paper Ownership is Rebuttable: Even if a spouse is formally listed on S corporation returns or Schedule K-1s as a significant owner, a practitioner can successfully establish a "nominee situation" under the principles of Rev. Proc. 2013-34 by demonstrating a complete lack of capital contributions, labor, and operational knowledge.
Expansion of the Abuse Exception: The decision confirms that the Tax Court is willing to extend the regulatory abuse exception beyond the actual knowledge limitations of § 6015(c) to overcome the "reason to know" constructive knowledge standard of I.R.C. § 6015(b). Where abuse is severe, a requesting spouse's general awareness of a spouse’s business activity will not bar full relief.

Prepared with assistance from NotebookLM.