- 14 - 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, 20Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011