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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, petitioner
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