- 12 - Although Mrs. Meyer owned no stock of AED, she exercised significant control over the funds of her husband's corporation and benefitted from corporate payment of personal expenses. Thus the omitted income inured to petitioner's benefit both directly and indirectly, and relief does not attach to the extent of such benefit. Kistner v. Commissioner, T.C. Memo. 1991-463, revd. on other grounds 18 F.3d 1521 (11th Cir. 1994), and remanded T.C. Memo. 1995-66. B. The Disallowed Expenses Unlike omitted income items, disallowed deductions are not automatically grossly erroneous if attributable to the putative culpable spouse alone. Rather, in order for petitioner to prove the disallowed Schedule C expenses "grossly erroneous", she must establish the claimed deduction has "no basis in fact or law". Sec. 6013(e)(2)(B). Petitioner can only meet this requirement if the claimed expenses lacked deductibility under well-established legal principles or if no substantial legal argument exists to support the deductibility of the expense. Russo v. Commissioner, 98 T.C. 28, 32-33 (1992); Douglas v. Commissioner, 86 T.C. 758, 762-763 (1986). Ordinarily, a deduction has no basis in fact or law if it is "fraudulent", "frivolous", "phony", or "groundless". Bokum v. Commissioner, supra at 1142; Russo v. Commissioner, 98 T.C. at 32; Douglas v. Commissioner, 86 T.C. at 763. The Court will not consider a deduction groundless merely because petitioner failedPage: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Next
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