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as an innocent spouse. Sec. 6013(e)(1); Purcell v. Commissioner,
826 F.2d 470, 473 (6th Cir. 1987), affg. 86 T.C. 228 (1986); Shea
v. Commissioner, 780 F.2d 561, 565 (6th Cir. 1986), affg. in part
and revg. and remanding T.C. Memo. 1984-310; Bokum v.
Commissioner, 94 T.C. 126, 138-139 (1990), affd. 992 F.2d 1132
(11th Cir. 1993).
Respondent concedes that joint returns were filed for the
applicable years and that the tax involved is the result of
grossly erroneous items. Petitioners must prove, however, that
Ms. Walters satisfies the remaining criteria for relief under
section 6013(e).
Grossly Erroneous Item of the Other Spouse
Respondent contends that funds derived from the CD scheme
are income also attributable to Ms. Walters. Respondent
maintains that Ms. Walters had control over the embezzled funds
sufficient to make the income attributable to her as well as to
Mr. Gherman because she cosigned FIP's checks. Accordingly,
respondent maintains, Ms. Walters does not qualify for relief
under the innocent spouse provisions.
Respondent's arguments are not persuasive. The fact that
Ms. Walters cosigned FIP's checks, attended board of directors
meetings, and held all of FIP's stock in her name might have been
determinative had the unreported income resulted from an
understatement of the income earned by FIP or an overstatement of
the deductions claimed by FIP. The unreported income, however,
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