Anthony J. Marzullo and Mary P. Marzullo - Page 16

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          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             




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