Eloise Gaddy Joens - Page 13

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                  The parties have stipulated that joint returns were filed                           
            for the years in issue.  Respondent contends, however, that                               
            petitioner does not meet the remaining section 6013 requirements.                         
                  Thus, the controversy herein focuses on three issues: (1)                           
            Whether the substantial understatements are attributable to                               
            grossly erroneous items of petitioner's then-husband, Emmens; (2)                         
            whether petitioner did not know, and had no reason to know, of                            
            the substantial understatements when she signed the return in                             
            each of the years in issue; and (3) whether it would be                                   
            inequitable to hold petitioner liable for the income tax                                  
            deficiencies attributable to such substantial understatements.                            
                  Based on the entire record, we find that the omissions from                         
            income are not grossly erroneous items attributable to Emmens                             
            alone, that petitioner knew or had reason to know of the                                  
            understatements when she signed the returns, and that it is not                           
            inequitable to hold her liable for tax.                                                   
                  Grossly Erroneous Items                                                             
                  Petitioner must establish that there was a substantial                              
            understatement of tax attributable to grossly erroneous items of                          
            her then-husband, Emmens.  Sec. 6013(e)(1)(B).  "Understatement"                          
            is defined as the amount of tax required to be shown on the                               
            return less the amount of tax shown on the return, reduced by any                         
            rebate.  Sec. 6661(b)(2)(A).  A substantial understatement is any                         
            understatement that exceeds $500.  Sec. 6013(e)(3).  Any item                             





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