Beverly Gordon - Page 15

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          the benefit of hindsight in her motion for reconsideration11 do             
          not establish any unusual circumstances or substantial error.12             
          Accordingly, we shall deny her motion.                                      
               To reflect the foregoing,                                              
                                             An order will be issued                  
                                        denying the respective motions                

          11  We have considered all the arguments advanced by Ms. Gordon             
          in her motion for reconsideration that are not discussed herein,            
          and we find them to be without merit.                                       
          12  We note that although we decided the innocent spouse issue              
          based on Ms. Gordon's failure to satisfy her burden of proving              
          that the claimed 1988 NOL deduction was a grossly erroneous item            
          within the meaning of sec. 6013(e)(2)(B), we could have found on            
          the record presented to us that the claimed 1988 NOL deduction              
          had a basis in fact and in law within the meaning of that section           
          and that therefore it is not a grossly erroneous item.  That is             
          because, as stated by the Court of Appeals for the Second Circuit           
          in Friedman v. Commissioner, 53 F.3d 523, 529-530 (2d Cir. 1995),           
          affg. in part and revg. in part T.C. Memo. 1993-549:                        
             The "innocent spouse" defense was designed to prevent the                
             inequity of holding one spouse liable for the oversubtle                 
             financial machinations of the other; the defense was not                 
             intended to permit one spouse to escape liability for an                 
             apparently legitimate claim that turns out to be disal-                  
             lowed.  The defense is all the more inappropriate * * *                  
             [where] both taxpayer[s] * * * were equally in the dark as               
             to the future status of their claim when they signed their               
             * * * return.                                                            
          Moreover, the record in these cases establishes that the question           
          of the treatment of the 1986 net trading loss as either an                  
          ordinary or a capital loss is a technical question of law, see              
          Haymond v. Commissioner, T.C. Memo. 1997-289, and the fact that             
          Mr. Gordon sold option contracts in the normal course of his                
          trade or business as an options market maker "provided an argu-             
          ably colorable--albeit incorrect--basis" for the treatment of the           
          1986 net trading loss as an ordinary loss, see Kelly v. Commis-             
          sioner, T.C. Memo. 1996-529, supplemented by T.C. Memo. 1997-99.            

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