Sherburne M. Edmondson, Jr. and Diane L. Edmondson - Page 3

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          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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