Mitchell S. Wiest - Page 12




                                       - 12 -                                         
         Thus, respondent’s denial of relief was based in part on his                 
         determination that approximately 37 percent of the underpayment              
         was attributable to petitioner.  As discussed below, respondent’s            
         conclusion concerning petitioner’s share of the unpaid liability             
         was arbitrary and without sound basis in fact.                               
              The determination letter contains no explanation of the                 
         computation underlying the conclusion that petitioner’s share of             
         the underpayment was 37 percent.  It is likewise silent regarding            
         the issue of petitioner’s entitlement to claim exemptions for                
         dependents.  In his posttrial brief, respondent takes the                    
         position that the determination letter’s calculation of                      
         petitioner’s share of the unpaid tax liability was based upon a              
         computation of his tax liability as if he had filed for 1994                 
         using a status of married filing separately.  According to                   
         respondent, petitioner’s hypothetical tax liability for 1994 so              
         computed would have been $4,327, which, after reduction for his              
         $2,696 withholdings, would have left an unpaid liability of                  
         $1,631--or approximately 40 percent of the actual unpaid                     
         liability ($4,062) for 1994.8                                                
              Respondent’s comparison of petitioner’s hypothetical                    
         liability as a married-filing-separately taxpayer, as reduced by             
         his actual withholdings, to the actual unpaid liability on his               

               8 Respondent offers no explanation for the discrepancy                 
          between his 40-percent computation on brief and the revenue                 
          agent’s 37-percent computation in the determination letter.                 





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