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that it is attributable only to Martin for purposes of section
6013(e)(1)(B). Respondent, however, contends that petitioner had
reason to know of the embezzlement income and that it would not
be inequitable to hold petitioner liable for the income tax
deficiencies and additions to tax relating to the embezzlement
income.
With regard to the $600,000 claimed Keogh deduction,
respondent concedes that $15,000 thereof represents an allowable
deduction on Martin and petitioner's 1983 joint Federal income
tax return.
With regard to the application of the innocent spouse
provision to the $585,000 balance of the claimed Keogh deduction
that is to be disallowed, respondent concedes that the $585,000
constitutes a grossly erroneous item. Respondent, however,
contends that the $585,000 is attributable not only to Martin,
but also to petitioner, that petitioner had reason to know of the
erroneous deduction and the circumstances surrounding the
transaction giving rise to the claimed deduction, and that it
would not be inequitable to hold petitioner liable for the income
tax deficiencies and additions to tax relating to the disallowed
$585,000 claimed Keogh deduction.
Generally, an item on a return will be regarded as not
attributable to a spouse if he or she was not involved in the
activity giving rise to the item. Feldman v. Commissioner, 20
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