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the taxable year. Qualified earned income is defined as an
amount equal to the excess of (a) the earned income of the spouse
for the taxable year, over (b) an amount equal to the sum of
certain deductions allowable under section 62 and properly
allocable to or chargeable against earned income. See sec.
221(b).
Respondent determined that both Frank and Katherine were
involved in Katherine’s palmistry business and, thus, allowed a
$3,000 married couples deduction for each of 1983 through 1986.
We have found that Frank was not actively involved in Katherine’s
palmistry business but was retired during the years 1983 through
1986. He had no earned income for those years. Consequently, we
hold that Frank and Katherine are not entitled to the married
couples deduction for 1983 through 1986.
I. Additions to Tax and Penalties
1. Sections 6653(b) and 6663
Respondent also determined additions to tax for fraud under
section 6653(b)(1) and (2) for 1983, 1984, and 1985; under
section 6653(b)(1)(A) and (B) for 1986 and 1987; and under
section 6653(b)(1) for 1988; and penalties for fraud under
section 6663 for 1989 and 1990. For 1983, 1984, and 1985,
section 6653(b)(1) imposes an addition to tax equal to 50 percent
of any underpayment in tax if any part of the underpayment was
due to fraud, and section 6653(b)(2) imposes a separate addition
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