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Background3
Petitioners were married during the entire taxable year
1989. They jointly filed a Federal Form 1040, Individual Income
Tax Return, for 1989, claiming a $177,200 bad debt deduction.
They also reported the income and expenses arising from PC
Systems, a retail computer business, on Schedule C of their tax
return. Petitioners reported ending inventory and cost of goods
sold for PC Systems of $1,321,501 and $4,635,061, respectively.
In her notice of deficiency, respondent determined that
$168,000 of the $177,200 bad debt deduction claimed by
petitioners was not allowable. Respondent also determined that
petitioners had understated their Schedule C ending inventory by
$1,067,736 and therefore overstated their cost of goods sold by
the same amount.
Innocent Spouse
Petitioner claims that she is entitled to innocent spouse
relief for the taxable year 1989.
As a general rule, spouses who file joint tax returns are
jointly and severally liable for Federal income tax due on their
combined incomes, as well as for interest on, and additions to,
the tax. Sec. 6013(d)(3); Park v. Commissioner, 25 F.3d 1289,
1292 (5th Cir. 1994), affg. T.C. Memo. 1993-252. However, an
innocent spouse may obtain relief from such liability if the
3 The following background findings are made for the sole
purpose of resolving the motion sub judice.
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Last modified: May 25, 2011