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Year Deficiency
1987 $39,011
1988 23,059
1989 29,594
The issues remaining for decision are:
(1) Is petitioner entitled to innocent spouse relief under
section 6013(e)(1)2 with respect to the portion of the deficiency
for each of the years 1987, 1988, and 1989 that is attributable
to certain income from funds that Mr. Morris embezzled and that
were not reported in the joint return that they filed for each
such year? We hold that she is.
(2) Is petitioner entitled to innocent spouse relief under
section 6013(e)(1) with respect to the portion of the deficiency
for 1987 that is attributable to deductions for a business bad
debt and the legal expenses incurred in attempting to recover
that debt that were claimed in the joint return for that year?
We hold that she is not.
(3) Did petitioner and Mr. Morris underreport by $10,000
1(...continued)
a decision in that case, which was based upon an agreement
between Mr. Morris and respondent that Mr. Morris is liable for
deficiencies in income tax and additions to tax for fraud due in
part to the omission of certain income attributable to embezzled
funds from the Federal income tax returns (joint returns) that he
and petitioner filed for the years at issue. Mr. Morris did not
join in the petition filed by petitioner and is not a party in
the present case.
2 All section references are to the Internal Revenue Code (Code)
in effect for the years at issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
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