Client filed joint return for 2018. Earlier that year, the wife passed away from a viral infection. Immediately thereafter, the husband contacted all known banks and credit card companies to advise them of his wife's death and cancel any cards that were solely in her name or jointly in both names. This included a Discover Card that had an outstanding balance of $16,000. That was the last and only contact the husband had with Discover until the IRS sent him a notice asking for $3,500 because of unreported income from a Form 1099-C Cancellation of Debt. The Form 1099-C is in the deceased wife's name and social security number only.
Is the husband eligible for Innocent Spouse relief per Form 8857? Prior to his wife's death, the husband worked for Homeland Security and spent considerable time overseas in the Middle East. Because of the dangerous work environment and absences from home, the husband was very unfamiliar with the day-to-day family bills and mail and even provided his wife with a Power of Attorney because of the work situation. It appears that all of the credit card transactions were legitimate purchases for the wife and the the two teenage girls. The husband was unaware of any of this until the IRS Notice was received. There was never any correspondence from Discover concerning the status of the debt, the cancellation of debt, or the fact that there would be reportable taxable income from the cancellation of the credit card debt.
Does the Innocent Spouse Relief apply here?