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through the years in issue, Gerald worked with Gelda in preparing
the Jacobys' tax returns. There existed a general understanding
between petitioner and Gerald that Gerald would handle the family
business and tax matters. We find the understanding between
petitioner and Gerald is evidence that petitioner intended to
file joint returns for 1978 and 1980. We conclude that
petitioner intended to file, and did file, joint returns for the
taxable years 1978 and 1980.
We next decide whether the understatements of tax were
attributable to grossly erroneous items. A deduction for which
there is no basis in fact or law is grossly erroneous. Sec.
6013(e)(2). A deduction has no basis in fact if the expense for
which the deduction is taken was not made, and a deduction has no
basis in law if the expense is not deductible under well-
established legal principles, or if no substantial legal argument
can be made to support its deductibility. Russo v. Commissioner,
supra at 32; Douglas v. Commissioner, 86 T.C. 758, 762-763
(1986).
We evaluate whether a claim is grossly erroneous as of the
time of filing of the tax return. Friedman v. Commissioner, 53
F.3d 523, 529 (2d Cir. 1995), revg. in part and remanding T.C.
Memo. 1993-549. Petitioner cannot rely on respondent's
disallowance in the statutory notice or her inability to
substantiate the losses to prove the lack of basis in fact or
law. Douglas v. Commissioner, supra at 763. Petitioner's
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