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spouses; (2) there is a substantial tax understatement
attributable to grossly erroneous items of the other spouse;
(3) in signing the return, the claimed "innocent spouse" did not
know, and had no reason to know, of the substantial tax
understatement; and (4) taking into account all the facts and
circumstances, it would be inequitable to hold the claimed
"innocent spouse" liable for the deficiency attributable to the
tax understatements. Sec. 6013(e)(1). Mrs. Wilkinson bears the
burden of proving that each of these requirements is satisfied,
and her failure to satisfy any one of these requirements
precludes "innocent spouse" relief. Rule 142(a); Friedman v.
Commissioner, supra at 529; Bliss v. Commissioner, 59 F.3d 374,
378 (2d Cir. 1995), affg. T.C. Memo. 1993-390.
In this case we focus on the second prong of the analysis.
In order for a taxpayer to qualify as an innocent spouse, there
must be a substantial tax understatement which is attributable to
grossly erroneous items of the other spouse. "Substantial
understatement" is defined as "any understatement (as defined in
section 6662(d)(2)(A)) which exceeds $500." Sec. 6013(e)(3).
Referencing section 6662(d)(2)(A), "understatement" is defined as
"the amount of the tax required to be shown on the return for the
taxable year, over * * * the amount of the tax imposed which is
shown on the return". As a threshold matter, the innocent spouse
defense is not available to Mrs. Wilkinson because there is no
substantial tax understatement for either 1988 or 1989. There
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