Lota Womack - Page 16

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          parties agree that the disallowed Schedule C expenses relate to             
          Mr. Womack's property services business.  They do not agree as to           
          the attribution of the unreported income.  Petitioner had no                
          income other than income from her secretarial job during the                
          years at issue, and all of her W-2 wage income was reported on              
          the tax returns.  We find that the source of the unreported                 
          income was an item attributable to Mr. Womack.                              
               Grossly Erroneous Items                                                
               "Grossly erroneous items" means any item of gross income               
          attributable to a spouse which is omitted from gross income and             
          any claim of a deduction, credit, or basis by a spouse in an                
          amount for which there is no basis in fact or law.  Sec.                    
          6013(e)(2).  An overstatement of cost of goods sold also results            
          in an item omitted from gross income and hence constitutes a                
          grossly erroneous item as a matter of law.  Lilly v. Internal               
          Revenue Service, 76 F.3d 568 (4th Cir. 1996); Metra Chem Corp. v.           
          Commissioner, 88 T.C. 564, 660-661 (1987); Velinsky v.                      
          Commissioner, T.C. Memo. 1996-180; Lawson v. Commissioner, T.C.             
          Memo. 1994-286; LaBelle v. Commissioner, T.C. Memo 1984-69.                 
               A deduction has no basis in law or fact if it is fraudulent,           
          frivolous, phony, or groundless.  Feldman v. Commissioner, 20               
          F.3d  at 1135; Douglas v. Commissioner, 86 T.C. 758, 763 (1986).            
          A taxpayer cannot rely on the disallowance of an item to prove              
          the lack of basis in fact or law.  Feldman v. Commissioner, 20              
          F.3d at 1136; Bokum v. Commissioner, 992 F.2d 1132, 1142 (11th              




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