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Friedman (petitioner) was an innocent spouse within the meaning
of section 6013(e).2 The parties' current controversy involves
their conflicting Rule 155 tax computations.
Initially, we found that petitioner was not entitled to
innocent spouse relief with respect to two items. Concerning the
capital loss carryover, we found it was not a grossly erroneous
item and that it did not meet the section 6013(e) requirements.
The U.S. Court of Appeals for the Second Circuit affirmed that
holding. Regarding losses from a computer leasing transaction,
we found the deductions of those losses to be grossly erroneous
items. However, we also found that petitioner failed to meet the
requirement that she did not know, or have reason to know, that
the deductions would give rise to substantial understatements
when she signed the returns. Sec. 6013(e)(1)(C). The Court of
Appeals reversed our finding on whether petitioner knew or had
1(...continued)
1045, rather than on the Form 1040; Friedman v. Commissioner,
T.C. Memo. 1992-89, concerning whether the testimony of an expert
witness could be offered to show whether one of petitioners was a
truthful witness; Friedman v. Commissioner, T.C. Memo. 1993-549,
affd. in part, revd. and remanded in part 53 F.3d 523 (2d Cir.
1995), which concerned whether Anna Friedman was an innocent
spouse within the meaning of sec. 6013(e); and Friedman v.
Commissioner, T.C. Memo. 1995-576, where we held that Anna
Friedman was an innocent spouse with respect to a grossly
erroneous item in accord with the judgment and remand of the
Court of Appeals and made findings concerning whether it was
equitable to hold her liable.
2 All section references are to the Internal Revenue Code
in effect for the taxable period under consideration, and all
Rule references are to this Court's Rules of Practice and
Procedure, unless otherwise indicated.
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