Angela Schwimmer - Page 13

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          on the basis of the disallowed $600,000 claimed Keogh deduction.                   
          Respondent attributed the alleged fraud for each year not just to                  
          Martin, but also to petitioner.                                                    

                                          OPINION                                            
                Generally, married taxpayers filing joint Federal income tax                 
          returns are treated as jointly and severally liable for taxes                      
          reported due on their combined income and for additions to tax                     
          relating thereto.  Sec. 6013(d)(3).                                                
                Because joint and several liability may produce hardship for                 
          an "innocent spouse" whose marriage partner received substantial                   
          unreported income, Congress enacted section 6013(e), as amended                    
          in 1984.  Section 6013(e) provides "innocent spouse" relief from                   
          joint and several liability for a taxpayer who filed a joint                       
          income tax return and who establishes the following:  (1) That a                   
          substantial understatement of tax resulted from a grossly                          
          erroneous item attributable to the other spouse; (2) that, in                      
          signing the return, the taxpayer did not know, or have reason to                   
          know of the understatement; and (3) that, in light of all of the                   
          facts and circumstances, it would be inequitable to hold the                       
          innocent spouse liable for the resulting deficiency.  Sec.                         
          6013(e)(1); Hayman v. Commissioner, 992 F.2d 1256, 1260 (2d Cir.                   
          1993), affg. T.C. Memo. 1992-228.                                                  
                Respondent concedes that the embezzlement income that Martin                 
          received constitutes a grossly erroneous item for each year and                    





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