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In November 1990, petitioner and Mr. French sold their
marital home located in Annapolis, Maryland. The net proceeds
from this sale amounted to approximately $144,000. These
proceeds were used to purchase a certificate of deposit in the
approximate amount of $144,000. This certificate of deposit was
issued solely in petitioner’s name. In early 1991, petitioner
cashed the certificate of deposit in order to aid Mr. French with
the purchase of a condominium in Pompano Beach, Florida. The
Pompano Beach condominium was subsequently sold pursuant to the
couple’s divorce decree. Petitioner received $100,000 from the
sale of the Pompano Beach condominium as a division of her
marital rights.
OPINION
Issue 1. Innocent Spouse
A husband and wife who file a joint return are jointly and
severally liable for the tax due. Sec. 6013(d)(3). An
"innocent" spouse, however, is relieved of liability if he or she
proves the following: (1) That a joint return has been made for
a taxable year; (2) that on such return there is a substantial
understatement of tax attributable to grossly erroneous items of
the other spouse; (3) that he or she did not know, and had no
reason to know, of such substantial understatement when he or she
signed the return; and (4) that after consideration of all the
facts and circumstances, it would be inequitable to hold him or
her liable for the deficiency in income tax attributable to such
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