- 37 - and this resulted in the 1980 tax refund that Nancy received in 1988 being greater than it would otherwise have been. Petitioners maintain that section 1.6013-5(b), Income Tax Regs., "disqualify a spouse for relief under Section 6013(e) only where the alleged benefit is derived from the omitted income and traceable to the omitted income (or deduction in this case)." They also maintain that (1) the New Jersey home was bought in 1976 from the funds not traceable to any refund of 1981 tax; (2) Nancy received only normal support, at a level attained before the 1981 tax refund; (3) the life insurance proceeds are not traceable to the 1981 tax refund; (4) the mortgage payments are properly treated as part of normal support at a level established before the 1981 tax refund; and (5) the tax refund that Nancy received in 1988 resulted from an abatement of 1980 tax liability that "had absolutely no relationship to the 1981 tax year." We agree with respondent's conclusion and contention as to the tax refund Nancy received in 1988. Under section 6013(e)(1)(D), Nancy is not entitled to innocent spouse treatment unless she can show that "taking into account all the facts and circumstances, it is inequitable to hold [her] * * * liable for the deficiency in tax * * * attributable to such substantial understatement". This provision of the statute specifically directs us to take into accountPage: Previous 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Next
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