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separate trial was held in Chicago, Illinois, on the issue of
whether Melinda B. Resser qualifies for relief under the innocent
spouse provision of section 6013(e).
In Resser v. Commissioner, T.C. Memo. 1994-241 (Resser II),
we concluded that Melinda B. Resser did not qualify as an
innocent spouse because she did not satisfy section 6013(e)(1)(C)
and (D), two of the four requirements of the innocent spouse
relief provision. Because we found that Melinda B. Resser did
not satisfy the requirements of section 6013(e)(1)(C) and (D), we
did not address whether the understatement resulted from a
grossly erroneous item, as required by section 6013(e)(1)(B).
On appeal, the Court of Appeals for the Seventh Circuit
reversed our decision and held that Melinda B. Resser did satisfy
section 6013(e)(1)(C) and (D). The Court of Appeals remanded the
case to this Court solely to determine whether Melinda B. Resser
satisfies section 6013(e)(1)(B). The parties agree, and we have
found that, for taxable year 1982, petitioners filed a joint
return and that there was a substantial understatement of tax
attributable to Alan M. Resser. Consequently, the issue before
us is whether the substantial understatement is attributable to
grossly erroneous items. For the reasons set forth below, we
find that the substantial understatement is attributable to
grossly erroneous items of Alan M. Resser and hold that Melinda
B. Resser has satisfied section 6013(e)(1)(B).
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