- 27 - 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.Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Next
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