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Under Bunney, no portion of Mr. Morris’s IRA distributions
are included in petitioner’s gross income.3 Similarly, the
section 72(t) additional tax does not apply to petitioner, and
applies only to Mr. Morris.
2. Relief Under Section 66(c)
We next turn to petitioner’s claim that respondent abused
his discretion in refusing to grant equitable relief under
section 66(c). Initially, we note that we are only concerned
with whether petitioner is entitled to equitable relief under
section 66(c) for the year 1996. With regard to 1997, petitioner
has no deficiency since no part of the IRA distribution for that
year is taxable to her.
Under a community property regime, each spouse is entitled
to file separate Federal income tax returns. When separate
Federal tax returns are filed, each spouse must report half of
the community income. United States v. Mitchell, 403 U.S. 190,
196-197 (1971). Under certain limited circumstances, one spouse
may be relieved of liability for taxes on that spouse’s share of
community income. These circumstances are set forth in section
66(c) as follows:
3 We note that in Bunney v. Commissioner, 114 T.C. 259, 262
(2000), respondent argued that the taxpayer was taxable on the
full amount of the distribution because he received the
distribution. Under this rationale, it would appear here that
petitioner would not be taxable on the distributions since she
did not receive any of the distributions.
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