- 14 - omitted from gross income is grossly erroneous. Sec. 6013(e)(2)(A). In addition, any claim of a deduction in an amount for which there is no basis in fact or law is grossly erroneous. Sec. 6013(e)(2)(B). A deduction has no basis in fact when the expense for which the deduction is taken was not made, and a deduction has no basis in law if the expense is not deductible under well-established legal principles or if no substantial legal argument can be made to support its deductibility. Douglas v. Commissioner, 86 T.C. 758, 762-763 (1986). Respondent determined that petitioner and Emmens had unreported income of $41,908 in 1982, $58,745 in 1983, and $262,147 in 1984. The majority of this income came from narcotics trafficking. Omissions from gross income are grossly erroneous. Sec. 6013(e)(2). The understatement of tax for each year attributable to the omitted income is substantial because it exceeds $500. Sec. 6013(e)(3). Respondent contends that petitioner was an integral part of the narcotics trafficking operation and that she played a significant role in both the generation and concealment of the unreported income. Petitioner claims that she never engaged in her then-husband's narcotics trafficking operation and was completely unaware of his involvement with drug smuggling until the date of his arrest, May 11, 1988. Therefore, petitionerPage: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Next
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