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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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