-12-
prevent innocent spouse relief. Bokum v. Commissioner, 94 T.C.
126, 138-139 (1990), affd. 992 F.2d 1132 (11th Cir. 1993).
MPM Income
We first consider Mrs. Marzullo's entitlement to relief with
respect to the understatement resulting from the understated income
of MPM. Respondent concedes the first statutory requirement--that
a joint return was filed--was satisfied.2
The second requirement is that the understatement is
"attributable" to the income of the other spouse (in this case, Mr.
Marzullo). Respondent asserts that the understatement resulting
from the entire understated income of MPM should be attributable to
Mrs. Marzullo, claiming that MPM should be viewed as a sole
proprietorship, with Mrs. Marzullo the proprietor. As would be
expected, petitioners disagree with respondent's position,
asserting instead that the corporate identity of MPM should be
respected for tax purposes. Further, petitioners counter
respondent's argument by claiming that all the unreported income of
MPM should be attributable to Mr. Marzullo because he had an
ownership interest in MPM and was the one who intentionally
understated MPM's gross receipts and net profits.
While we agree with respondent's position that MPM's
unreported income (the grossly erroneous item) should be
2 Although petitioners claim that Mrs. Marzullo did not
sign the 1986 and 1987 tax returns, they do not disclaim the fact
that those returns are in fact joint returns.
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