Philip H. Friedman and Anna Friedman - Page 7

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          directs us to a specific portion of the manual provisions, as               
          follows:                                                                    
               This computation will start with the total corrected                   
               taxable income without regard to the innocent spouse                   
               provisions and will eliminate therefrom the adjustments                
               for which relief is provided under such public law.                    
               * * *                                                                  
          Petitioner contends that the elimination of the grossly erroneous           
          leasing transaction is tantamount to permitting the deduction to            
          the innocent spouse.  Respondent treats the elimination language            
          as disregarding the grossly erroneous leasing transaction so as             
          not to charge petitioner, the innocent spouse, with income from             
          the disallowance of the claimed loss.  Respondent goes on to                
          compute the effect of the disallowance of the short-term capital            
          loss carryover, which is not an item for which innocent spouse              
          relief was granted.  In that manner, respondent arrives at a                
          portion of the 1983 tax liability for which Mr. Friedman (the               
          "culpable" spouse) and Mrs. Friedman (the "nonculpable" spouse)             
          are both liable.  That joint liability is then subtracted from              
          the liability determined in the notice of deficiency, resulting             
          in the portion of the liability for which only Mr. Friedman (the            
          "culpable" spouse) is liable.  We agree with respondent's                   
          approach and interpretation.                                                



               5(...continued)                                                        
          computation is in error.  Petitioner's attack is one that                   
          concerns only theory or approach.                                           




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