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(1) Whether petitioner qualifies for innocent spouse relief
under section 6013(e). We hold that she does not.
(2) Whether petitioner is liable for the addition to tax
for a substantial understatement of income tax under section 6661
for the taxable year at issue. We hold that she is.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein. Petitioner resided in Frederica, Delaware,
at the time the petition was filed in this case.
For each of the 6 taxable years ending in 1990, petitioner
and her husband (Mr. French) filed joint Federal income tax
returns. The return for taxable year 1988 was filed in October
1989 and contained a net operating loss (NOL) of $618,987. The
NOL was derived from several entrepreneurial undertakings by Mr.
French. On November 10, 1989, petitioner signed a Form 1045,
Application for Tentative Refund, requesting that $226,855 of the
NOL from 1988 be carried back to taxable year 1986.
Concurrently, petitioner and Mr. French filed related Forms 1040X
with respect to taxable years 1986 and 1988. On or about January
20, 1990, petitioner and Mr. French received a refund check in
the approximate amount of $226,000 for taxable year 1986.
Following an audit, respondent disallowed part of the 1988
NOL which was carried back to 1986. Respondent now seeks to
recapture the corresponding portion of the refund.
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