- 41 -
all of Sheldon's life insurance policies were bought before the
year in issue.
Sheldon's probate estate was insolvent, and Nancy spent more
than $100,000 (including the horse business expenditures) in
winding up Sheldon's affairs. However, at or around the time of
Sheldon's death Nancy received (1) about $1.6 million in life
insurance proceeds (supra table 8), (2) Sheldon's interest,
valued at about $125,000, in their Franklin Federal Tax Free
Income Fund, and (3) Sheldon's interest in the jointly owned New
Jersey home they bought in 1975.
Based on the foregoing, it is more likely than not, because
of the circumstances of Sheldon's and Nancy's life, and because
Sheldon made a considerable amount of money during his life, that
the above items received by Nancy are normal support and are not
benefits related to the tax savings produced by the State Coal
royalty deduction.
An additional consideration in weighing the equities is
whether innocent spouse treatment might result in the putative
innocent spouse being relieved of liability for tax on that
spouse's own income. This might occur if the putative innocent
spouse had income that was offset by a grossly erroneous
deduction item of the putative guilty spouse. See discussion in
Elting, "Innocent Spouse Relief Availability Is Far From
Certain", 23 Taxn. for Lawyers 205, 210-211 (1995). In the
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