- 6 - I. Grossly Erroneous Requirement Linda must establish that there was a substantial understatement of tax attributable to grossly erroneous items of Ronnie. Sec. 6013(e)(1)(B). A substantial understatement is any understatement that exceeds $500. Sec. 6013(e)(3). Any item omitted from gross income is grossly erroneous. Sec. 6013(e)(2)(A). In addition, any claim of a deduction in an amount for which there is no basis in fact or law is grossly erroneous. Sec. 6013(e)(2)(B). A deduction has no basis in fact when the expense for which the deduction is taken was not made, and a deduction has no basis in law if the expense is not deductible under well-established legal principles or if no substantial legal argument can be made to support its deductibility. Douglas v. Commissioner, 86 T.C. 758, 762-763 (1986). Respondent disallowed several of the deductions claimed by petitioners. Linda contends that Ronnie's inability to substantiate the amounts claimed on the return provides a sufficient basis to conclude that the expenses were, in fact, never made. A taxpayer may not rely on the mere disallowance of a claimed deduction or an inability to substantiate the amount of an otherwise allowable deduction to establish that the deduction had no basis in fact or law. United States v. Shanbaum, 10 F.3d 305, 314 (5th Cir. 1994); Flynn v. Commissioner, supra at 364.Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011