Womack v. Commissioner

T.C. Memo. 1996-242

UNITED STATES TAX COURT

LOTA WOMACK, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 25258-93. Filed May 23, 1996.

John S. Winkler, for petitioner.

Michael D. Zima, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

PARKER, Judge: Respondent determined the following

deficiencies in income taxes and accuracy-related penalties for

petitioner Lota Womack and her husband, David H. Womack:

Penalty Under
Year Deficiency Sec. 6662(a)

1989 $1,886 $377
1990 7,121 1,424
Unless otherwise indicated, all section references are to the

Internal Revenue Code in effect for the taxable years before the

Court, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

The issue for decision is whether petitioner qualifies for

relief as an innocent spouse under section 6013(e).

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.

The stipulation of facts and the exhibits attached thereto are

incorporated herein by this reference. Petitioner resided in

Jacksonville, Florida, at the time she filed her petition.

Family Life

Petitioner married David H. Womack (Mr. Womack) on October

27, 1972, at the age of 18. Three children were born of this

marriage: David S. Womack, born February 28, 1974; Lota Michelle

Womack, born June 14, 1979; and Charles E. Womack, born April 4,

1986. During the years at issue, the Womack family lived in

Jackson County, North Carolina, in the small town of Cashiers.

For approximately a week to 10 days in December of 1988, Mr.

Womack was institutionalized in a mental hospital. He did not

immediately return to the family residence upon release.

Petitioner and Mr. Womack (the Womacks) lived apart from

approximately December 3, 1988, through May 1, 1989. Petitioner

and the children stayed in the family residence in Cashiers,

North Carolina. On January 13, 1989, the Womacks entered into a
 - 3 -

separation agreement. On or about May 1, 1989, they reconciled

and began living together again in the family residence.

On or about September 19, 1992, petitioner and Mr. Womack

again separated. The Womacks entered into another separation

agreement on October 4, 1993 (the second separation agreement).

By this time, petitioner had left North Carolina and was living

in Florida. The second separation agreement placed the minor

children in the primary custody of Mr. Womack, with summer and

holiday vacations to be divided between the parents. Mr. Womack

agreed to pay petitioner $300 per month in alimony. The Womacks

were divorced on September 6, 1994. The divorce decree modified

the separation agreement so that petitioner was given primary

custody of their daughter.

Business Activities

Petitioner has a high school diploma. She worked as an

uncertified dental assistant off and on from the time of her high

school graduation until sometime in the early 1980's. In 1987

and 1988, petitioner assisted Mr. Womack in his equipment repair

and rental business, a sole proprietorship known as Cashiers

Repairs and Sales (the repair business). Her duties included

waiting on customers, keeping daily records and receipts, and

writing checks. The repair business had an office (the first

office) at its shop.

Sometime in 1987 or 1988, Mr. Womack started a property

services business known as Cashiers Property Services (the
 - 4 -

property services business); the property services business was

also conducted as a sole proprietorship. Cashiers is located in

a resort area in the mountains of North Carolina. Many of the

property services business's clients were people who owned

vacation homes in the Cashiers area. The property services

business opened and closed these vacation homes seasonally. The

property services business painted buildings, winterized building

exteriors, and performed landscaping and lawn care activities

such as mowing lawns, planting trees and flowers, and raking

leaves; it also picked up trash, paved roads, cleared lots, and

provided transportation to the airport for its clients. Mr.

Womack procured the clients, purchased the equipment and supplies

needed, performed labor, and hired additional temporary laborers,

if necessary, for his business.

For a few months Mr. Womack operated both businesses out of

the first office. At some point prior to the years at issue, Mr.

Womack phased out the repair business and closed the first

office. From the closing of the first office until the Womacks'

first separation, and for part of 1989, after their

reconciliation, Mr. Womack conducted the property services

business out of the family residence. Later in 1989, Mr. Womack

rented office space for the property services business (the

second office) from Debbie Stroup (Ms. Stroup). Mr. Womack

closed the second office in September of 1992.
 - 5 -

Mr. Womack never kept his own books. Petitioner kept the

records and the checkbook for the repair business and the

property services business up until the time of the Womacks'

first separation. She took the books and records to an

accountant to do the actual bookkeeping and to prepare the tax

returns.

After Mr. Womack's hospitalization in December of 1988, his

business declined precipitously to practically nothing. When Mr.

Womack was released from the mental hospital, he found that

petitioner had closed his business and personal bank account,

that much of his business supplies and equipment had disappeared,

and that his truck had been retitled in the name of petitioner's

boyfriend. During the spring of 1989, Mr. Womack began

reestablishing the property services business. At that time, Ms.

Stroup began keeping the checkbook and the books and records for

the property services business. However, Ms. Stroup did not

prepare the tax returns; the accountant continued to prepare the

returns. Mr. Womack would turn over his invoices and any

receipts and other tax documents he had to Ms. Stroup. Mr.

Womack was not consistent in keeping receipts for the supplies he

purchased while working.

During 1989 and 1990, petitioner was aware that Mr. Womack

was operating the property services business. Mr. Womack kept

her informed of his whereabouts, and she knew some of his

clients. Petitioner occasionally would go to his office on the
 - 6 -

way to a family activity, or to get funds for household expenses

from Mr. Womack or Ms. Stroup. However, petitioner did not

perform any services for the property services business in 1989

and 1990.

Petitioner began working as a secretary in January of 1989.

She was employed on a full-time basis from May 1989 through 1990

by Interprop, Inc., as a secretary at a construction site. She

had no other job during this period. Her wages were $12,803 in

1989 and $17,471 in 1990.1

Mr. Womack also worked as a baseball umpire. The record

does not show when Mr. Womack umpired, the amounts he was paid

for umpiring, or when those amounts were paid. It was Mr.

Womack's recollection that most of the schools for which he

umpired did not issue him a Form W-2 or 1099. The Form W-2 for

Mr. Womack attached to the 1990 return reflects wages of $1,000,

but the name of the employer does not appear on this Form W-2.

Family Finances

During the Womacks' marriage, petitioner and Mr. Womack

divided household expenses between them. During 1989 and 1990,

petitioner had a personal bank account at Brevard Federal Bank in

1
The parties stipulated that petitioner's 1990 wages were
$18,471; this is the amount on Line 7 of the Womacks' 1990
Federal income tax return. However, after entering into this
stipulation, respondent located the original copy of the 1990
return with two Forms W-2 attached. One Form W-2 showed wages of
$1,000 for Mr. Womack; the other, wages of $17,471 for
petitioner.
 - 7 -

Cashiers, North Carolina, into which she deposited her paychecks.

Petitioner used funds from her personal account to pay household

expenses such as groceries, day care, medical expenses and

clothing for herself and the children, and gasoline. Mr. Womack

paid the larger household expenses, including the mortgage,

telephone, electricity, water, and trash bills, and the

automobile insurance. As of January 1989, the Womacks' monthly

mortgage payment was $945. On those occasions when petitioner

was unable to cover her own or her children's expenses with her

own funds, she would tell Mr. Womack what was needed, and he

would supply her with the necessary funds.

Petitioner's net pay after withholdings for the years 1989

and 1990 was $10,606 and $14,528, respectively. The amount of

cash petitioner withheld when depositing her paychecks totaled

$2,444 in 1989, and $2,400 in 1990. During 1990, a total of

$24,718 was deposited into petitioner's Brevard Federal account.

In 1989 and 1990, Mr. Womack received loans of $12,000 and

$6,000, respectively, from petitioner's father. Petitioner was

unaware of these loans. During 1990, Mr. Womack also received

loans from Joe Stroup totaling $2,704. Other funds received by

one or both of the Womacks during the years at issue were:

Source 1989 1990

Veterans Administration $5,486.00 $5,486.00
Sale of equipment 20,000.00 2,500.00
Mr. Womack's W-2 net pay 777.95
 - 8 -

In 1989 or 1990, petitioner underwent surgery to remove some

growths from her breasts and back. At the same time, she

received breast implants. Petitioner's medical insurance would

not cover the cost of the breast implants. Mr. Womack paid most,

if not all, of the expenses for the implants; his contribution

did not exceed $5,000.

Mr. Womack purchased several items of jewelry for petitioner

during the years at issue. He bought her a diamond wristwatch, a

diamond anniversary ring, at least one bracelet,2 and a matching

necklace and earring set. Petitioner also traded in a wedding

band for a larger one. These purchases were made at Zales

Jewelers in Charlotte, North Carolina, and through television

shopping; some items were purchased on credit. Mr. Womack

stopped making payments on the jewelry in September of 1992,

after the Womacks separated. The record does not indicate

whether or not the balance for the jewelry was ever paid.3

Neither petitioner nor Mr. Womack purchased any real

property between 1989 and 1991, inclusive.

Tax Returns

2
Mr. Womack described a diamond tennis bracelet he
purchased for her. Petitioner described a small gold link
bracelet with a few topaz stones that he purchased for her.
3
Mr. Womack estimated the cost of his jewelry purchases for
petitioner at $6,000 to $7,000; petitioner estimated such
purchases at $2,000 to $2,100. Apparently there was only one
item for which Mr. Womack did not make full payment.
 - 9 -

During their marriage, the Womacks used a tax return

preparer to complete their returns. Petitioner and Mr. Womack

filed joint Federal income tax returns for 1989 and 1990; those

returns were prepared by Robert C. Wade, an accountant. The

returns as filed reflect, among others, the following pertinent

items:

Item 1989 1990

Form 1040:

Wages $12,803 $18,471
Business income (loss) (7,118) (735)
Adjusted gross income 5,736 18,353
Child care credit --- ---
Self-employment tax 0 0
Total tax on return 0 0
Earned income credit 796 ---

Schedule A:1

Medical expenses --- 4,276
Mortgage interest 9,048 7,541
Personal interest paid 2,356 769
Charitable contributions 500 1,200

1
These amounts reflect the amounts reported as paid, not
necessarily the amounts taken as deductions.

The Schedules C attached to the Womacks' 1989 and 1990 tax

returns reflect the following items:

Item 1989 1990

Gross receipts or sales $33,774 $220,582
Cost of goods sold 19,613 126,539
Gross income 14,161 94,043
Expenses (including 21,279 94,778
depreciation)
Net profit (loss) ($7,118) ($735)
 - 10 -

The cost of goods sold items are identified on the Schedules

C as follows:

Item 1989 1990

Purchases $10,760 ---
Subcontract labor 8,853 ---
Cost of labor --- $ 53,300
Materials and supplies --- 73,239

TOTALS $19,613 $126,539

In general, Mr. Womack's customers or clients paid him for

services rendered, principally lawn care services, rather than

for purchases of goods. The record does not indicate that Mr.

Womack's property services business maintained any inventories of

goods or that Mr. Womack sold any goods to his customers,

although he may have made some incidental purchases of trees,

flowers, or grass seed that he planted. Mr. Womack also made

purchases of paints, lawn mowers, rakes, and other tools and

supplies that he and his laborers used in the property services

business. Mr. Womack made purchases of depreciable property for

use in the business in the amounts of $32,313 in 1989 and $87,047

in 1990. Depreciation deductions were claimed in the amounts of

$6,338 and $29,795, respectively, for those years.

Petitioner did not review the 1989 return before signing it,

nor did she question Mr. Womack about it. She assumed it had

been prepared by a capable accountant. Petitioner does not

remember signing the 1990 return but did give Mr. Womack her 1990
 - 11 -

Form W-2 as she had done in each previous year of their marriage.

No separate return was filed by petitioner for 1990.

Examination of Returns

Respondent examined the 1989 and 1990 returns and, on

September 9, 1993, mailed a separate notice of deficiency to each

of the spouses who were at that time again separated and in the

process of divorcing. Respondent determined the following

increases (decreases) in income:

Item 1989 1990

Income $15,982 $10,263
Business expenses 3,329 23,853
Depreciation (3,822) (5,755)
Early withdrawal penalty (311)
Self-employment tax deduction (1,952)
Itemized deductions 1,981

TOTAL $15,178 $28,390

Respondent used the bank deposits method to determine

unreported income. In determining the omitted income of $15,982

and $10,263, respondent took into account petitioner's W-2 wage

income, Mr. Womack's W-2 wage income, the loans from petitioner's

father and Joe Stroup, and the miscellaneous income items

discussed above; the omitted income was in addition to all of

those known sources.

The parties have stipulated that the Commissioner "has

accepted an aggregate amount of Schedule C expenses and cost of

goods sold and/or operations paid by David Womack" for the

property services business in the amount of $31,225 for the year
 - 12 -

1989 and $167,669 for the year 1990.4 Actually the notice of

deficiency listed all of the deduction categories, including the

labor and materials (purchases) items described on the returns as

cost of goods sold, simply as Schedule C expenses. For 1989

respondent reduced purchases from $10,760 to $8,420 and reduced

subcontract labor from $8,853 to $7,706. For 1990 respondent

increased cost of labor from $53,300 to $67,388 and reduced

materials and supplies from $73,239 to $34,344.

Of the 13 categories of Schedule C expenses (not including

depreciation) reported in 1989, respondent reduced the allowable

expenses in six categories by a total of $7,514 and increased

four categories by a total of $4,185, for a net reduction of

$3,329. Of the 18 categories of Schedule C expenses (not

including depreciation) for 1990, respondent decreased eight

categories by a total of $52,557 and increased six categories by

a total of $28,704, for a net reduction of $23,853. Respondent

also identified $3,063 of personal expenses for insurance and

4
The Court does not read this as a stipulation that Mr.
Womack's property services business in fact involved cost of
goods sold. See Velinsky v. Commissioner, T.C. Memo. 1996-180,
where on the facts of that case the Court concluded that there
was indeed cost of goods sold. On the record in the present
case, the Court concludes that the income of the business is
derived from performance of services, principally lawn care
services. The record does not indicate that Mr. Womack
maintained any inventories or sold goods to customers or clients.
To the extent that the stipulation can be read as showing that
this case involves cost of goods sold, the Court will disregard
the stipulation as a legal conclusion unsupported by the factual
record.
 - 13 -

utilities that had been included among the business expenses

claimed for 1990 and disallowed by respondent. Respondent

increased the depreciation deduction for both years and allowed a

deduction for an early withdrawal penalty that the Womacks had

not taken in 1989. In calculating the Womacks' tax liability,

respondent allowed a child care credit of $133 and $378, for 1989

and 1990, respectively, credits that the Womacks had failed to

take. Respondent computed self-employment tax of $1,090 and

$3,903 for 1989 and 1990, respectively, and disallowed

(recaptured) the earned income credit of $796 claimed for 1989.

Petitioner's adjusted gross income for 1992, according to

the return she filed for that year, was $6,183. Her 1992 filing

status was married, filing separately. Petitioner also filed a

return for 1993.

Mr. Womack has not petitioned this Court or otherwise

contested respondent's determinations as set forth in the notice

of deficiency. Mr. Womack apparently has paid some $1,900 to

$2,800 of the tax deficiency. He does not understand how the

returns were prepared or respondent's determinations. The

records that Mr. Womack gave to Ms. Stroup for the accountant to

use in preparing the returns at issue were placed in storage in

July of 1993, along with furniture, office equipment, and other

of Mr. Womack's belongings. That occurred at the time the family

residence was foreclosed on, when Mr. Womack and the three

children had to move out of that house. In July of 1994, the
 - 14 -

contents of the storage space were auctioned off when Mr. Womack

was unable to make the rental payment on the storage space.

OPINION

Normally, spouses who have filed a joint return are jointly

and severally liable for the tax due. Sec. 6013(d)(3). However,

section 6013(e)(1) relieves a spouse of liability for the tax,

including interest, penalties, and other amounts, attributable to

the substantial understatement of tax of the other spouse, if the

alleged innocent spouse meets the following requirements: (1) A

joint Federal income tax return was filed; (2) there is a

substantial understatement of tax attributable to grossly

erroneous items of the other spouse; (3) in signing the return,

the alleged innocent spouse did not know, and had no reason to

know, of the substantial understatement; and (4) taking into

account all the facts and circumstances, it would be inequitable

to hold the alleged innocent spouse liable for the deficiency

attributable to such substantial understatement.5 Sec.

6013(e)(1).

5
In addition, in order for a taxpayer to be eligible for
relief, the liability arising from the above-described
understatement of tax must exceed 10 percent of the taxpayer's
preadjustment year adjusted gross income, where that adjusted
gross income is $20,000 or less. Sec. 6013(e)(4)(A). The
preadjustment year means the most recent taxable year of the
taxpayer ending before the date the deficiency notice is mailed,
here 1992. Sec. 6013(e)(4)(C). Section 6013(e)(4) does not
apply to any liability attributable to the omission of an item
from gross income. Sec. 6013(e)(4)(E). Here petitioner's
preadjustment year adjusted gross income was $6,183, so any
section 6013(e)(4) requirement is satisfied.
 - 15 -

The taxpayer has the burden of proving that he or she meets

each of these requirements. Feldman v. Commissioner, 20 F.3d

1128, 1134-1135 (11th Cir. 1994), affg. T.C. Memo. 1993-17;

Stevens v. Commissioner, 872 F.2d 1499, 1504 (11th Cir. 1989),

affg. T.C. Memo. 1988-63. A failure to prove any one of these

requirements will prevent the taxpayer from qualifying for

relief. Feldman v. Commissioner, supra; Stevens v. Commissioner;

supra; Bokum v. Commissioner, 94 T.C. 126, 138 (1990), affd. 992

F.2d 1132 (11th Cir. 1993).

The parties now agree that petitioner filed joint returns

with Mr. Womack for 1989 and 1990.6 We now consider the other

requirements for innocent spouse relief.

Substantial Understatement Attributable to Grossly Erroneous

Items of the Other Spouse

Items Attributable to Mr. Womack

The deficiencies in this case stem from unreported income

and disallowed Schedule C expenses. The remaining items in the

notice of deficiency either decrease income or, being

computational in nature, derive from the above adjustments. The

6
At the calendar call, petitioner filed a motion to dismiss
as to taxable year 1990 for lack of jurisdiction or, in the
alternative, for leave to file amended petition. In support of
this motion, petitioner alleged that petitioner's signature on
the 1990 return was forged and that, therefore, the 1990 return
was not a joint return. The Court denied the motion for
dismissal and granted the motion for leave to file an amended
petition to include this alternative. Petitioner has now
abandoned this alternative position, acknowledging in her opening
brief that the parties agree that joint returns were filed in
1989 and 1990.
 - 16 -

parties agree that the disallowed Schedule C expenses relate to

Mr. Womack's property services business. They do not agree as to

the attribution of the unreported income. Petitioner had no

income other than income from her secretarial job during the

years at issue, and all of her W-2 wage income was reported on

the tax returns. We find that the source of the unreported

income was an item attributable to Mr. Womack.

Grossly Erroneous Items

"Grossly erroneous items" means any item of gross income

attributable to a spouse which is omitted from gross income and

any claim of a deduction, credit, or basis by a spouse in an

amount for which there is no basis in fact or law. Sec.

6013(e)(2). An overstatement of cost of goods sold also results

in an item omitted from gross income and hence constitutes a

grossly erroneous item as a matter of law. Lilly v. Internal

Revenue Service, 76 F.3d 568 (4th Cir. 1996); Metra Chem Corp. v.

Commissioner, 88 T.C. 564, 660-661 (1987); Velinsky v.

Commissioner, T.C. Memo. 1996-180; Lawson v. Commissioner, T.C.

Memo. 1994-286; LaBelle v. Commissioner, T.C. Memo 1984-69.

A deduction has no basis in law or fact if it is fraudulent,

frivolous, phony, or groundless. Feldman v. Commissioner, 20

F.3d at 1135; Douglas v. Commissioner, 86 T.C. 758, 763 (1986).

A taxpayer cannot rely on the disallowance of an item to prove

the lack of basis in fact or law. Feldman v. Commissioner, 20

F.3d at 1136; Bokum v. Commissioner, 992 F.2d 1132, 1142 (11th
 - 17 -

Cir. 1993), affg. 94 T.C. 126 (1990); Douglas v. Commissioner,

supra.

In the instant case, the unreported income is by definition

grossly erroneous. It is not clear whether petitioner is arguing

that there was an overstatement of cost of goods sold in this

case. In any event, on the record in this case, it appears that

Mr. Womack was in the business of rendering services, primarily

lawn care services for vacation-home owners. The Court cannot

find that Mr. Womack maintained inventories of goods or

manufactured, produced, or purchased goods for resale. Secs.

1.61-3(a), 1.162-1(a), Income Tax Regs. The Court cannot find

that Mr. Womack's property services business involved cost of

goods sold. Compare LaBelle v. Commissioner, supra, that

involved an automobile dealership and Velinsky v. Commissioner,

supra, that involved the production of a music video for a

customer.

In order for the disallowed business expenses to be grossly

erroneous items, petitioner must demonstrate that those expenses

had no basis in fact or in law. Mr. Womack possessed no

understanding of the preparation of the tax returns. Petitioner

did not call Ms. Stroup, Mr. Wade, or respondent's revenue agent

to testify. Petitioner has presented no proof that any of the

disallowed expenses were not incurred; i.e., had no basis in

fact.
 - 18 -

The notice of deficiency states that $3,063 of personal

expenses were disallowed for 1990. Other than this, petitioner

has presented no proof that any of the disallowed expenses lacked

a legal basis. We hold that $3,063 of the disallowed expenses

for 1990 were grossly erroneous. The grossly erroneous items

attributable to Mr. Womack thus consist of the unreported income

and $3,063 of the disallowed business expenses.

Substantial Understatement

A substantial understatement is one that exceeds $500. Sec.

6013(e)(3). The amounts of the understatements related to the

grossly erroneous items of Mr. Womack for 1989 and 1990,

respectively, each exceed $500 and, therefore, are substantial.

Knowledge of the Understatement

A taxpayer seeking innocent spouse relief must establish

that he or she in signing the return did not know, and had no

reason to know, that there was a substantial understatement of

tax. Sec. 6013(e)(1)(C). A spouse has reason to know if a

reasonably prudent taxpayer under the taxpayer's circumstances at

the time of signing the return could be expected to know the

return was erroneous or that further investigation was warranted.

Stevens v. Commissioner, 872 F.2d at 1505; Bokum v. Commissioner,

94 T.C. at 148. The test establishes a duty of inquiry. Stevens

v. Commissioner, supra. If a spouse knows enough facts to be put

on notice of the possibility of a substantial understatement, she
 - 19 -

has a duty to inquire further. Guth v. Commissioner, 897 F.2d

441, 444-445 (9th Cir. 1990), affg. T.C. Memo. 1987-522.

Factors to be considered in determining whether the spouse

had reason to know are the alleged innocent spouse's level of

education; the spouse's involvement in the family's business and

financial affairs; the presence of expenditures that appear

lavish or unusual when compared to the family's past levels of

income, standard of living, and spending patterns; and the

culpable spouse's evasiveness and deceit concerning the couple's

finances. Stevens v. Commissioner, 872 F.2d at 1505; Flynn v.

Commissioner, 93 T.C. 355, 365-366 (1989).

Petitioner has a high school education. She assisted Mr.

Womack in keeping records for his businesses, but prior to the

years in issue. She did not have access to the business books or

records for the taxable years 1989 or 1990. She was responsible

for paying routine family expenses, such as groceries, gas, and

the children's expenses, but Mr. Womack paid the larger mortgage,

utility, and insurance bills. Petitioner and Mr. Womack operated

in separate spheres financially, except that Mr. Womack provided

funds to petitioner as needed to pay household and personal

expenses. Mr. Womack paid for petitioner's breast implants and

bought her several gifts of jewelry during the years at issue.

Petitioner did not review the 1989 return and does not

remember whether she herself signed the 1990 return. This does

not excuse her from responsibility for their contents. The
 - 20 -

Schedules A attached to the returns listed some of the Womacks'

expenses. Petitioner knew how her paycheck was spent and that

all of her paycheck was spent. Her net pay in 1990 was $14,528

but $24,718 was deposited into her Brevard Federal account. She

knew that she received additional money from Mr. Womack to pay

household expenses and other expenses for her and the children.

Petitioner did not know about the loans from her father and did

not establish that she knew of any other sources of funds

available to Mr. Womack. Petitioner had a duty to inquire as to

how Mr. Womack could pay their usual bills and afford the

additional expenses of her surgery and jewelry, when he was

reporting no net income from his business. Mr. Womack paid a

monthly mortgage payment of $945 for a total of over $10,000 a

year. We find that petitioner had reason to know of the

understatements.

Inequity of Holding Petitioner Liable

To qualify for innocent spouse relief, the taxpayer must

show that, given all the facts and circumstances, it would be

inequitable to hold the taxpayer liable for the tax deficiency

attributable to the substantial understatement of the other

spouse. Sec. 6013(e)(1)(D). One factor to consider is whether

the taxpayer seeking relief significantly benefited from the

erroneous items of the other spouse. Estate of Krock v.

Commissioner, 93 T.C. 672, 677 (1989). Normal support is not a

significant benefit. Id. at 678-679; Flynn v. Commissioner, 93
 - 21 -

T.C. at 367; sec. 1.6013-5(b), Income Tax Regs. Normal support

is determined by the circumstances of the parties. Sanders v.

United States, 509 F.2d 162, 168 (5th Cir. 1975); Estate of Krock

v. Commissioner, supra at 678-679; Flynn v. Commissioner, supra

at 367.

Another factor to consider is whether the spouse seeking

relief had been deserted by, or divorced or separated from, the

culpable spouse. Sec. 1.6013-5(b), Income Tax Regs. Yet, this

is only one of the factors to be considered, and section 6013(e)

relief is not limited to spouses whose marriage has ended. Mysse

v. Commissioner, 57 T.C. 680, 700 (1972). A third factor is

whether probable future hardships would be visited upon the

innocent spouse if she is not relieved of liability. Sanders v.

United States, 509 F.2d at 171 n.16.

Petitioner received the gifts of jewelry, and Mr. Womack

provided the funds for her breast implants. Petitioner has not

shown that these expenditures were normal support. Neither has

petitioner shown this liability would pose a hardship to her. We

hold that it would not be inequitable to hold petitioner liable.

In keeping with the above,

Decision will be entered

for respondent.