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of the innocent spouse provision. "Grossly erroneous items" are
defined, in relevant part, as "any claim of a deduction, credit,
or basis by such spouse in an amount for which there is no basis
in fact or law." Sec. 6013(e)(2)(B). A deduction has no basis
in fact when the expense for which it is claimed was never, in
fact, made. Douglas v. Commissioner, 86 T.C. 758, 762 (1986). A
deduction has no basis in law when the expense, even if made,
does not qualify as a deductible expense under well-settled legal
principles or when no substantial legal argument can be made in
support of its deductibility. Flynn v. Commissioner, 93 T.C.
355, 364 (1989); Douglas v. Commissioner, supra at 762-763. The
spouse seeking relief need only prove that an item of deduction
lacked either a basis in fact or a basis in law, but need not
prove both. See Id. at 762-763. Ordinarily, a deduction has no
basis in fact or law if it is "fraudulent", "frivolous", "phony",
or "groundless". Bokum v. Commissioner, 992 F.2d 1132, 1142
(11th Cir. 1993), affg. 94 T.C. 126 (1990); Douglas v.
Commissioner, supra at 763. Whether a claim of deduction is
grossly erroneous must be evaluated as of the time of filing of
the tax return. Friedman v. Commissioner, 53 F.3d 523, 529 (2d
Cir. 1995), affg. in part, revg. in part, and remanding T.C.
Memo. 1993-549.
The parties do not dispute that the deduction in question
had a basis in fact. Consequently, our inquiry is whether the
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