-16-
understatement and conclude that it would be inequitable to hold
Mrs. Marzullo liable for the understatement of tax on her husband's
unreported income from the College. Accordingly, Mrs. Marzullo is
entitled to innocent spouse relief as to Mr. Marzullo's unreported
income from the College.
Disallowed Itemized Deductions
Finally, we turn to Mrs. Marzullo's innocent spouse claim with
respect to the understatement resulting from the disallowed
itemized deductions. The record with respect to this issue is
scant. No evidence was presented as to the spouse (Mr. and/or Mrs.
Marzullo) to whom the disallowed deductions are attributable or
whether the deductions are "grossly erroneous items" as defined in
section 6013(e)(2). Thus, petitioners failed to prove all the
elements necessary for Mrs. Marzullo's entitlement to innocent
spouse relief with respect to the understatement resulting from the
disallowed itemized deductions. Accordingly, we sustain
respondent's determination in this regard.
Issue 2. Self-Employment Tax
Respondent determined that petitioners owe self-employment tax
under section 1401 on MPM's income, contending that the video
production business was operated as a sole proprietorship, and that
the corporate form should be disregarded. Petitioners claim that
the business was operated as a partnership prior to its
incorporation on August 31, 1987, and that from August 31, 1987,
MPM was a corporation. Petitioners assert that MPM's corporate
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011