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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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