Edward and Ruth Kelly - Page 2

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            *This opinion supplements our previously filed Memorandum                                 
            Findings of Fact and Opinion in Kelly v. Commissioner, T.C. Memo.                         
            1996-529, filed Dec. 2, 1996.                                                             
            deficiencies, additions to tax, and penalties, and denied the                             
            claim of petitioner Ruth Kelly (petitioner) to relief from                                
            liability as an innocent spouse under section 6013(e).1  The                              
            Opinion is incorporated herein by this reference.                                         
                  Petitioner filed a timely motion for reconsideration,                               
            pursuant to Rule 161.  Respondent filed a notice of objection and                         
            memorandum of argument and authorities.  Petitioner Edward Kelly                          
            has not filed a response to petitioner's motion.                                          
                  Petitioner argues that the Court incorrectly held that the                          
            deductions for ordinary losses and for business expenses claimed                          
            on the joint returns were not "grossly erroneous" within the                              
            meaning of section 6013(e)(2)(B), as having "no basis in fact or                          
            law", that upon reconsideration, the Court should conclude that                           
            the husband's loss deductions claimed on the joint return                                 
            satisfied the "grossly erroneous" test, and that the Court should                         
            proceed to determine that petitioner satisfied each of the other                          
            requirements for innocent spouse status.                                                  
                  Specifically, petitioner argues that the Court, in rejecting                        
            her argument that the deductions claimed were "phony", failed to                          
            address whether they were "groundless" or "frivolous", and that,                          


                  1Except where otherwise noted, all section references are to                        
            sections of the Internal Revenue Code in effect for the years in                          
            issue, and all Rule references are to the Tax Court Rules of                              
            Practice and Procedure.                                                                   



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