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Construction in 1997 for the home improvements were addressed to
petitioners’ personal residence. Petitioners shared a joint
checking account for personal finances, Mrs. Kosinski’s name was
on the account, and she wrote checks on that account. Even if
her husband was responsible for balancing their joint checking
account, as Mrs. Kosinski testified, it is implausible that
Mrs. Kosinski was not aware that the expenses for improvements to
petitioners’ home were paid out of T.J. Construction’s bank
account and not from petitioners’ personal account.
We do not believe Mrs. Kosinski’s implausible testimony and
conclude that she was an active participant in a fraudulent
scheme to understate petitioners’ income and tax liability. She
has not met the requirement of section 6015(b)(1)(C), nor has she
established, pursuant to section 6015(b)(1)(D), that it would be
inequitable to hold her liable for the deficiency in petitioners’
tax for 1997.
Statute of Limitations
As a general rule, section 6501 provides that any tax must
be assessed within 3 years of the date on which the pertinent tax
return was filed. Sec. 6501(a). However, an exception exists in
the case of a “false or fraudulent return”, under which exception
tax may be assessed at any time. Sec. 6501(c)(1). Respondent
bears the burden of proving fraud in this context. Sec. 7454(a);
Rule 142(b). Because respondent has done so here for the reasons
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Last modified: November 10, 2007