Lori D. Sleeth v. Commissioner of Internal Revenue, 991 F.3d 1201

Lori and David Sleeth filed joint federal tax returns for 2008–2010 that showed large unpaid tax liabilities (about $363,000, excluding interest and penalties) and two of the returns were filed late in 2011.
Lori sought innocent-spouse equitable relief under 26 U.S.C. § 6015(f) after the IRS denied her request; she claimed she didn’t know taxes weren’t being paid and would suffer economic hardship if held liable.
The couple had significant financial distress: repossession of their primary home, other assets lost, and David’s prior late payment problems with the IRS; David’s adjusted gross income at the time was about $418,000.
Lori retained a townhouse in the divorce (testified to >$100,000 equity), received some divorce and insurance proceeds, and worked part-time (~$10/hour); the divorce agreement required David to assume responsibility for tax liabilities and to support her claim.
The Tax Court found three Revenue Procedure 2013-34 factors favoring relief (marital status, lack of significant benefit, later compliance), three neutral (economic hardship, legal obligation, health), and that the knowledge/reason-to-know factor weighed strongly against relief; it denied relief.
The Eleventh Circuit reviewed for abuse of discretion and affirmed, holding the Tax Court did not abuse its discretion in evaluating and balancing the equitable factors.

Issue	Sleeth's Argument	IRS/Respondent's Argument	Held
Economic-hardship factor under Rev. Proc. 2013-34	Lori: her low income means hardship favors relief; she shouldn’t be forced to borrow against townhouse equity.	Tax Court/IRS: Lori failed to prove inability to meet basic living expenses and had assets (townhouse equity, divorce/insurance proceeds) that could pay taxes.	Factor properly treated as neutral; no abuse of discretion.
Knowledge / reason-to-know factor (did Lori unreasonably believe David would pay?)	Lori: she assumed David would pay and lived apart for years, so she lacked reason to know taxes wouldn’t be paid.	Tax Court/IRS: Lori signed returns (constructive knowledge), knew of prior IRS problems, had access to joint accounts and awareness of financial distress; thus reason to know.	Factor weighed strongly against relief; Tax Court’s finding not clearly erroneous.
Weighting of factors / abuse of discretion	Lori: Tax Court over-weighted the knowledge factor so as to override three favorable factors.	Tax Court/IRS: Revenue Procedure allows a single factor to be dispositive in context; balancing was within court’s discretion.	No abuse of discretion; one strong negative factor can justify denial despite multiple positive factors.

Comm’r v. Neal, 557 F.3d 1262 (11th Cir. 2009) (taxpayer bears burden to show entitlement to § 6015(f) relief; standards of review).
United States v. $70,670.00 in U.S. Currency, 929 F.3d 1293 (11th Cir. 2019) (abuse-of-discretion explained).
Honeycutt v. United States, 137 S. Ct. 1626 (2017) (explaining joint-and-several liability principles).
Jacobsen v. Comm’r, 950 F.3d 414 (7th Cir. 2020) (one factor may outweigh others in § 6015(f) balancing).
Kistner v. Comm’r, 18 F.3d 1521 (11th Cir. 1994) (risks of joint returns; spousal knowledge relevant).
Porter v. Comm’r, 132 T.C. 203 (Tax Ct. 2009) (presumption of constructive knowledge from signing a return).
Stevens v. Comm’r, 872 F.2d 1499 (11th Cir. 1989) (courts may apply common-sense assessment to reason-to-know questions).