TREATMENT OF CERTAIN INNOCENT SPOUSES.

SEC. 6004. TREATMENT OF CERTAIN INNOCENT SPOUSES. Subsection (c) of section 424 of the Tax Reform Act of 1984 (relating to innocent spouse relieved of liability in certain cases) is amended by adding at the end thereof the following new paragraph: “(3) Transitional rule.— If— “(A) a joint return under section 6013 of the Internal Revenue Code of 1954 was filed before January 1, 1985, “(B) on such return there is an understatement (as defined in section 6661(b)(2)(A) of such Code) which is attributable to disallowed deductions attributable to activities of one spouse, “(C) the amount of such disallowed deductions exceeds the taxable income shown on such return, “(D) without regard to any determination before October 21, 1988, the other spouse establishes that in signing the return he or she did not know, and had no reason to know, that there was such an understatement, and “(E) the marriage between such spouses terminated and immediately after such termination the net worth of the other spouse was less than $10,000, notwithstanding any law or rule of law (including res judicata), the other spouse shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent such liability is attributable to such understatement, and, to the extent the liability so attributable has been collected from such other spouse, it shall be refunded or credited to such other spouse. No credit or refund shall be made under the preceding sentence unless claim therefor has been submitted to 102 STAT. 3686the Secretary of the Treasury or his delegate before the date 1 year after the date of the enactment of this paragraph, and no interest on such credit or refund shall be allowed for any period before such date of enactment.”.