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6013(e)(1)(B)); (5) when the tax return was signed the putative
innocent spouse did not know, and had no reason to know, that
there was this substantial understatement of tax (sec.
6013(e)(1)(C)); and (6) it is inequitable to hold the putative
innocent spouse liable for the tax deficiency that is
attributable to this substantial understatement of tax. Sec.
6013(e)(1)(D). Also (as elements of item (3), supra), if any
such item is a claim of deduction, credit, or basis, then the
putative innocent spouse must show that the claim has no basis in
fact or law (sec. 6013(e)(2)(B)); and the tax liability for these
items must exceed a certain percentage of the putative innocent
spouse's income for the preadjustment year, in the instant case,
1988.6 Sec. 6013(e)(4); Hayman v. Commissioner, 992 F.2d 1256,
1260 (2d Cir. 1993), affg. T.C. Memo. 1992-228; Bokum v.
Commissioner, 94 T.C. at 138, 992 F.2d at 1133-1134.
6 The preadjustment year is "the most recent taxable year
* * * ending before the date the deficiency notice is mailed."
Sec. 6013(e)(4)(C). The notice of deficiency was mailed on May
26, 1989; thus 1988 is the preadjustment year. Nancy's 1988
income was increased by her profit on the sale of the New Jersey
home. This increase in Nancy's 1988 income was enough to
disqualify her from innocent spouse treatment for 1982
(deficiency of $27,232), but not for 1981 (deficiency of
$185,361). Because the parties agree that the preadjustment year
substantiality requirement is enough to disqualify Nancy from
innocent spouse treatment for 1982, we do not consider whether
she failed to meet any of the other requirements as to 1982.
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