-3-
Edmondson bears the burden of proof are sustained. Thus, the
principal issue to be resolved is whether Diane L. Edmondson
qualifies for tax relief as an innocent spouse.
We also must consider an issue raised by respondent's amended
answer, even though the matter was covered by the settlement
stipulation. The issue so presented is whether gain from the sale
of a house in Seattle, Washington, which was owned by Mr. Edmondson
and his first wife, qualifies for deferred recognition pursuant to
section 1034.
All section references are to the Internal Revenue Code for
the year in issue; all Rule references are to the Tax Court Rules
of Practice and Procedure.
FINDINGS OF FACT
Background
At the time they filed their petition, Sherburne M. Edmondson,
Jr., and Diane L. Edmondson (hereinafter sometimes referred to as
the Edmondsons) resided in Sunnyvale, California. Ms. Edmondson
(hereinafter referred to as petitioner) filed an amendment to
petition on April 12, 1995, asserting that she is an innocent
spouse. Petitioner and Mr. Edmondson untimely filed their 1988
joint Federal income tax return on February 11, 1991.
The Edmondsons' Marriage
Petitioner and Mr. Edmondson met in Seattle in 1981. The
next year they married. At that time, petitioner was 21 years old,
and Mr. Edmondson was approximately 10 years older. Mr. Edmondson
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