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In our opinion, it is an abuse of discretion to deny
relief under section 6015(f) in an addition to tax or
penalty situation when on an individual basis the
putative innocent spouse meets the statutory standard
generally applied to all taxpayers that shows the
addition to tax or penalty is inapplicable. [Id. at
199.]
A. Addition to Tax for Failure To File Timely
Respondent determined that petitioners were liable for the
addition to tax pursuant to section 6651(a)(1) for 1989. Section
6651(a)(1) imposes an addition to tax for failure to file a
required return on the date prescribed. After factoring in the
parties’ concessions and our decisions in petitioner’s favor,
petitioner does not have an unpaid tax liability for 1989. In
light of respondent’s concession, petitioner is not liable for
the addition to tax for 1989.
B. Substantial Understatement Penalty
For the taxable years 1987 and 1988, respondent determined
that petitioners were liable for the substantial understatement
penalty pursuant to section 6661. However, after taking into
account respondent’s concessions and the issues decided in
petitioner’s favor, petitioner’s sole remaining liability for
those years involves an $85 theft loss adjustment in 1987 which
the parties agree is allocable one-half to petitioner.37 With
the minimal theft loss adjustment remaining as the only issue for
petitioner for 1987, the predicate for the substantial
37See appendix.
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