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

                                 T.C. Memo. 2005-73                                   

                               UNITED STATES TAX COURT                                

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

               Docket No. 12108-98.             Filed April 6, 2005.                  

                    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) Ps’ marriage contract did             
               not have the effect of stopping application of Louisiana’s             
               usual community property laws for Federal income tax                   
               purposes; and (3) each P is liable for the fraud penalty               
               (alternatively, the negligence penalty) for both years in              
               issue.  In Downing v. Commissioner, T.C. Memo. 2003-347 we             
               held that (1) the marriage contract did prevent income-                
               splitting, and so P-W had no deficiency and no fraud (or               
               negligence) penalty; (2) substantial amounts of income were            
               omitted from P-H’s tax return; and (3) P-H is liable for               
               civil fraud.                                                           
                    P-W moves for an award of costs.                                  

               * This opinion supplements our previously filed opinion in             
          Downing v. Commissioner, T.C. Memo. 2003-347, hereinafter                   
          sometimes referred to as Downing I.                                         

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