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tax attributable to the funds Ms. Dawson embezzled from her
employers during that year.
Community Income Issue
The next issue we shall consider is whether any of the funds
embezzled by Ms. Dawson during 1989 are taxable to petitioner.10
Petitioner is taxable on the funds to the extent of his ownership
interest under Texas law. United States v. Mitchell, 403 U.S.
190, 194-197 (1971), and cases cited therein. Texas law provides
for a community system of property rights of spouses. Tex.
Const. art. 16, sec. 15; Tex. Fam. Code Ann. sec. 5.01 (West
1993). Under that system, each spouse has a vested interest in,
and is the owner of, one-half of all such property. Johnson v.
Commissioner, 72 T.C. 340, 343 (1979). Consequently, a spouse is
liable for the Federal income tax on the portion of any income
that is community property. Id. A spouse, however, has no
ownership interest in, and is not taxable on, income that is the
separate property of the other spouse. Id. Our inquiry
accordingly focuses on whether the $95,072 embezzled by Ms.
10
Because petitioner filed a separate tax return from Ms.
Dawson for 1989, petitioner concedes that he is not eligible for
relief as an innocent spouse under sec. 6013(e). Petitioner,
however, does not contend, and we do not consider whether, he
qualifies as an innocent spouse pursuant to sec. 66(c), under
which a taxpayer who does not file a joint return may be relieved
of liability for tax on items of community income attributable to
the taxpayer’s spouse. See Roberts v. Commissioner, 860 F.2d
1235, 1238-1239 (5th Cir. 1988), affg. T.C. Memo. 1987-391.
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