Gerald Jacoby and Arlene Jacoby - Page 2

                                                 - 2 -                                                    
                                     Year               Deficiency                                        
                                     1978                     $93,098                                     
                                     1979                     84,284                                      
                                     1980                     28,675                                      
            Respondent also determined that petitioners are liable for                                    
            increased interest pursuant to section 6621(c) (formerly section                              
            6621(d))1 for the taxable years 1978, 1979, and 1980.                                         
                  After concessions by the parties, the sole issue for                                    
            decision is whether Arlene Jacoby (petitioner) is entitled to                                 
            relief as an innocent spouse for the taxable years 1978, 1979,                                
            and 1980.  We hold that she is so entitled.  Petitioner Gerald                                
            Jacoby (Gerald) has reached a settlement with respondent                                      
            regarding his liabilities for all taxable years.                                              
                  All section references are to the Internal Revenue Code in                              
            effect for the years in issue, and all Rule references are to the                             
            Tax Court Rules of Practice and Procedure, unless otherwise                                   
            indicated.                                                                                    




            1     Sec. 6621(d) was redesignated as sec. 6621(c) by sec.                                   
            1511(c)(1)(A) of the Tax Reform Act of 1986, Pub. L. 99-514, 100                              
            Stat. 2085, 2744, and repealed by sec. 7721(b) of the Omnibus                                 
            Budget Reconciliation Act of 1989 (OBRA 89), Pub. L. 101-239, 103                             
            Stat. 2106, 2399, effective for tax returns due after Dec. 31,                                
            1989, OBRA 89 sec. 7721(d), 103 Stat. 2400.  The repeal does not                              
            affect the instant case.  For convenience, we refer to this                                   
            section as sec. 6621(c).   The annual rate of interest under sec.                             
            6621(c) for interest accruing after Dec. 31, 1984, equals 120                                 
            percent of the interest payable under sec. 6601 with respect to                               
            any substantial underpayment attributable to tax-motivated                                    
            transactions.                                                                                 




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