Michael J. Downing and Sandra M. Downing - Page 1

                                 T.C. Memo. 2003-347                                  

                               UNITED STATES TAX COURT                                

               MICHAEL J. DOWNING AND SANDRA M. DOWNING, Petitioners v.               
                    COMMISSIONER OF INTERNAL REVENUE, Respondent                      

               Docket No. 12108-98.            Filed December 29, 2003.               

                    Ps resided in Louisiana, a community property State.              
               Shortly before their wedding, in 1989, they “filed for                 
               registry” (La. Civ. Code Ann. art. 2332 (West 1985)) in St.            
               Tammany Parish (where both of them then resided) a marriage            
               contract which provided that “The intended husband and wife            
               shall be separate in property * * *.”  Before the years in             
               issue (1994 and 1995), Ps moved to Jefferson Parish.  P-H              
               operated a plumbing business during the years in issue.  Ps            
               filed separate tax returns for the years in issue, on which            
               they reported only their respective incomes, without regard            
               to Louisiana’s usual community property laws.  R determined            
               that (1) substantial amounts of income from P-H’s plumbing             
               business had not been reported on Ps’ separate income tax              
               returns, (2) the marriage contract did not have the effect             
               of stopping application of Louisiana’s usual community                 
               property laws for Federal income tax purposes, (3) both Ps             
               are liable for the fraud addition to tax for both years in             
               issue, and (4) there were other miscellaneous adjustments.             

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