- 17 -
In the instant case, petitioners’ pleadings did not
challenge respondent’s determinations that Louisiana’s community
property laws required Michael’s omitted business income to be
split with Sandra.6 The parties do not consider whether events
described supra note 6 have any impact on whether we should judge
the reasonableness of respondent’s position as of respondent’s
answer.
Also, the parties do not focus on what respondent knew of
the facts when the answer was filed, but accept the relevant
matters of fact as we found them in Downing I. Thus, as to the
6 In the notices of deficiency, respondent determined that
Louisiana’s usual community property laws applied so as to
require the “splitting” of petitioners’ income, including the
substantial amounts that respondent determined as unreported
income from Michael’s business. In their joint petition,
petitioners did not assign error to this community property
determination. Instead, they contended that they filed amended
tax returns to change their status from “Married Filing Separate”
to “Married Filing Joint”. In the answer, respondent admitted
receiving the amended tax returns electing joint return status,
but stated that those documents had not been processed because
they were “received after the statutory notices of deficiency
were mailed to each of the petitioners.” In the reply,
petitioners repeated their assertions that their amended tax
returns changed their filing status.
Finally, at the trial session, petitioners conceded that
their filing status is “married filing separate” and dropped
their joint return contentions. Downing I note 4. At that
point, the applicability of Louisiana’s usual community property
laws became potentially material to the results in the case. See
Downing I note 12 for a discussion of the conflict-of-interest
problems that arose from the introduction of this issue at such
a late date in the proceedings.
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011