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For purposes of section 6013(e), grossly erroneous items are
defined as "any item of gross income attributable to such spouse
which is omitted from gross income," and "any claim of a deduc-
tion, credit, or basis by such spouse in an amount for which
there is no basis in fact or law." Sec. 6013(e)(2)(A) and (B);
Purcell v. Commissioner, supra at 474. Ordinarily, a deduction
has no basis in law or fact if it is "'fraudulent,' 'frivolous,'
'phony,' or 'groundless.'" Bokum v. Commissioner, supra at 1142
(quoting Stevens v. Commissioner, 872 F.2d 1499, 1504 n.6 (11th
Cir. 1989), affg. T.C. Memo. 1988-63); see Ness v. Commissioner,
954 F.2d 1495 (9th Cir. 1992), revg. 94 T.C. 784 (1990). A
deduction has no basis in fact when the expense for which it is
claimed was never, in fact, made. Douglas v. Commissioner, 86
T.C. 758, 762 (1986). A deduction has no basis in law when the
expense, even if made, does not qualify as deductible expense
under well-settled legal principles or when no substantial legal
argument can be made in support of its deductibility. Id. The
fact that the deduction has been disallowed does not, however,
dictate a finding that the deduction is "grossly erroneous".
Ness v. Commissioner, supra at 1498.
The deductions in question arose from petitioner's husband's
investment in Progressive Properties and Oxnard Properties, part-
nerships formed and managed by Sol Finkelman. The losses claimed
by Progressive and Oxnard for the years in issue, and the dis-
tributive shares of those losses claimed by one of the partners,
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