-6-
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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