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use. She was unaware of the 1996 withdrawal and the precise
amount of the 1997 withdrawal.
Petitioner was not involved in any way with the operations
or the recordkeeping for Mr. Morris’s business activities. She
knew, however, that he did not maintain proper records and dealt
in cash. Petitioner suspected that Mr. Morris did not report all
of his income on his Federal income tax returns. When petitioner
confronted Mr. Morris regarding his income, records, and the
proper filing of his Federal income tax returns he became
verbally and physically abusive.
Petitioner filed separate Federal income tax returns for
1996 and 1997 because of her suspicions regarding Mr. Morris’s
honesty in reporting his correct Federal income tax liability.
She believed that filing separately would relieve her of any
liability from his defalcations.
Respondent determined that during 1996 and 1997, without
regard to the effect of a community property regime, petitioner
and Mr. Morris received income and were entitled to deductions as
follows:
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