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Petitioners did not file Forms 1040, U.S. Individual Income
Tax Return, for any of the taxable years 1997, 1998, 1999, and
2002. The last time petitioners filed Federal income tax returns
before the years at issue was in 1993. Petitioners made no
estimated tax payments for any of the years at issue.
OPINION
Respondent determined that petitioners had unreported income
in the aforementioned amounts for 1997, 1998, and 1999, as well
as additions to tax under section 6651(a)(1) for failing to file
returns and under section 6654 for failing to make estimated tax
payments for each of those years. Respondent determined
deficiencies for each petitioner based on the full amount of his
or her income earned in each year, as well as half of the income
earned by each petitioner’s spouse in that year.2 Respondent
also determined that Mrs. Callahan had unreported income in 2002
as well as additions to tax under sections 6651(a)(1) and 6654.
Respondent also asserted, in a motion to amend the pleadings,
that she had marital income equal to one-half of Mr. Callahan’s
compensation for services in that year.
2 Respondent acknowledges that the notices of deficiency at
issue create a “whipsaw” for each petitioner. He concedes that
in the event the Court finds that Wisconsin marital property law
gives each petitioner a present undivided one-half interest in
the income of his or her spouse earned during the years in issue,
each petitioner is not taxable on the half of his or her income
in which his or her spouse holds the aforementioned interest.
Instead the income is attributable to the spouse who holds the
present undivided interest in it.
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Last modified: November 10, 2007