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The spouse claiming innocent spouse relief must prove that
all four requirements prescribed by section 6013(e)(1) are
satisfied in order to be entitled to such relief. Bliss v.
Commissioner, 59 F.3d 374, 378 (2d Cir. 1995), affg. T.C. Memo.
1993-390.
Respondent concedes that (1) the Gordons filed a joint
return for 1988, (2) there was a substantial understatement of
tax in that return with respect to the claimed 1988 NOL deduction
that was attributable to Mr. Gordon, and (3) Ms. Gordon did not
know, and had no reason to know, of the substantial understate-
ment of tax for 1988 that was attributable to that claimed
deduction.17 Respondent argues, however, that the claimed 1988
NOL deduction does not constitute a grossly erroneous item under
section 6013(e)(1)(B) because (1) respondent did not disallow
that deduction, but merely recharacterized it as a deduction for
a capital, rather than an ordinary, loss, and (2) even if respon-
dent were considered to have disallowed that deduction, Ms.
Gordon has not established that there was no basis in fact or in
law for that deduction. Respondent further argues that, under
the facts and circumstances presented here, it is not inequitable
under section 6013(e)(1)(D) to hold Ms. Gordon liable for the
portion of the understatement of tax for 1988 that is attribut-
17 Respondent also concedes that the understatement attributable
to the claimed 1988 NOL deduction satisfies sec. 6013(e)(4).
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