Anna Ruth French - Page 7

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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.                                                             
          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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