Hugh Wilkinson and Evelyn Wilkinson - Page 21

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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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