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On March 1, 1991, NCID seized Life and declared it
insolvent, relieving Mr. Martin of his position as president of
Life. Thereafter, the Martins began selling off or losing their
assets to foreclosure in order to pay day-to-day living expenses.
By September 1991, most of the Martins’ assets had either been
repossessed or sold to pay their daily living expenses. In July
of 1992, the Martins filed a voluntary liquidating bankruptcy.
During 1994, a 33-count criminal indictment was issued against
Mr. Martin and his sister for diverting insurance premiums to
hide them from the NCID regulators. Mr. Martin was found guilty
on November 27, 1995, following a 3-month trial. Petitioner
attended the trial each day but was not named as a defendant and
had no knowledge of the diversion.
As of the time of the trial of this case, petitioner resided
in her children’s homes, had no assets, and was unable to work
due to poor health. At that time, Mr. Martin remained
incarcerated, with his prison term to conclude in 2006, and the
Martins remain married.
OPINION
Petitioner seeks relief, under section 6015, from income tax
deficiency determinations that she now concedes are not in error.
Respondent concedes that petitioner is entitled to “separation of
liability relief” under section 6015(c) with respect to three
Schedule C adjustments as follows: $17,232 for 1986 airplane
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