Marcia S. Green - Page 6

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          have been married since 1979 and have been living together in               
          California at all times relevant to this case.                              
               Petitioner reported $437,368 of gross wages for 2002.                  
          Petitioner did not attach a statement to the return describing              
          the jury award or any authority for excluding from income any               
          portion of the jury award.  She attached only Form W-2, Wage and            
          Tax Statement, issued by the State reporting $11,508 of wages               
          paid to petitioner in 2002.  There was no way to determine from             
          the return or from any attachment to the return the source of the           
          other $425,860 of wage income petitioner reported.  Petitioner’s            
          husband did not include any portion of the jury award in his                
          income.                                                                     
               Respondent determined in a deficiency notice that petitioner           
          should have included the jury award in income4 and that                     
          petitioner is liable for an accuracy-related penalty for                    
          substantial understatement of income tax for 2002.  Petitioner              
          timely filed a petition.                                                    
                                       OPINION                                        
               We are asked to decide whether any portion of the jury award           
          is excludable from gross income and whether petitioner is liable            
          for an accuracy-related penalty.  We are also asked to decide               
          whether the jury award is community property under California               
          law.  We begin with the burden of proof.                                    


               4Respondent has since conceded that petitioner did include             
          $425,860 of the jury award in income.                                       



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