- 15 -
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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