                          T.C. Memo. 1996-144



                        UNITED STATES TAX COURT



      ESTATE OF CARLOS A. VEGA, DECEASED, TRINIDAD O. VEGA,
ADMINISTRATRIX,AND TRINIDAD O. VEGA, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 10708-94.                   Filed March 21, 1996.



     Trinidad O. Vega, pro se.

     Steven M. Roth and Gregory Powers, for respondent.



                MEMORANDUM FINDINGS OF FACT AND OPINION


     FOLEY, Judge:     By notice dated May 24, 1994, respondent

determined deficiencies in Carlos and Trinidad Vega's 1988 and

1989 Federal income taxes in the amounts of $16,550 and $6,701,

respectively.    The parties have stipulated that the only
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remaining issue is whether for tax years 1988 and 1989 Trinidad

Vega qualifies for "innocent spouse" relief pursuant to section

6013(e).   We hold that she does not qualify.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

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

Procedure.    The stipulations of facts and the stipulations of

agreed adjustments are incorporated by this reference.

                          FINDINGS OF FACT

     At the time the petition was filed, Trinidad Vega resided,

and Carlos Vega's estate had a mailing address, in Los Angeles,

California.

     Mr. and Mrs. Vega were married and lived together during the

years in issue.    Mrs. Vega did not work outside the home, and her

primary responsibility was raising the couple's two dependent

children, George and Melissa.

     Mr. Vega controlled the family finances.     He was a real

estate broker and partner in Vega, Barr & Associates.     He owned

seven rental properties in 1988 and eight in 1989.     All of these

properties were held in his name alone.      Mr. Vega did not permit

Mrs. Vega to have her own bank account or credit card, and he

wrote most of the checks on their joint bank account.     Mr. Vega

died intestate on May 7, 1990.    Prior to Mr. Vega's death, Mrs.

Vega did not know how many properties he owned, nor was she aware

of the details of his business affairs.
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     Mr. Vega routinely asked Mrs. Vega to sign documents without

explaining their content or legal effect.   He assured her that

signing the documents was in the family's best interest.    He

frequently told her that her role was to take care of the house

and children and that she could leave if she did not like this

arrangement.   Invariably, she would sign the documents.

     The Vegas' 1988 individual income tax return reported total

Schedule C (Profit or Loss From Business or Profession) income of

$2,000, total Schedule C deductions of $64,725, and total

Schedule E (Supplemental Income Schedule) income of $84,993.

     The Vegas' 1989 individual income tax return reported total

Schedule C income of $5,000, total Schedule C deductions of

$26,421, and no self-employment tax.

     On May 24, 1994, respondent issued a notice of deficiency to

Mrs. Vega and Mr. Vega's estate for the 1988 and 1989 tax years.

With respect to the 1988 tax return, respondent disallowed the

deductions totaling $64,725 due to lack of substantiation and

increased total Schedule E income by $1,952.   These adjustments

resulted in a deficiency in the amount of $16,550 for 1988.      With

respect to the 1989 tax return, respondent disallowed the

deductions totaling $26,421 due to lack of substantiation.       This

adjustment resulted in a deficiency of $6,701.

     On June 21, 1994, Mrs. Vega filed her petition with this

Court requesting relief under section 6013(e).
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                              OPINION

     Section 6013(d)(3) provides the general rule imposing joint

and several liability on spouses that file a joint return.       The

so-called innocent spouse provision of section 6013(e) is an

exception to this general rule.   Under section 6013(e), Mrs. Vega

will be relieved of liability for tax (including interest,

penalties, and other amounts) if she establishes that:     (1) A

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

substantial understatement of tax attributable to grossly

erroneous items of Mr. Vega; (3) in signing the return, Mrs. Vega

did not know, and had no reason to know, of the substantial

understatement; and (4) taking into account all of the facts and

circumstances, it would be inequitable to hold Mrs. Vega liable

for the deficiency attributable to such substantial

understatement.   Mrs. Vega bears the burden of proving she meets

each of the four elements.   Rule 142(a); Welch v. Helvering, 290

U.S. 111, 115 (1933).   Her failure to establish any of the

elements will preclude innocent spouse relief.     Bokum v.

Commissioner, 94 T.C. 126, 138 (1990), affd. 992 F.2d 1132 (11th

Cir. 1993).

     We hold that Mrs. Vega does not qualify for protection as an

innocent spouse for 1988 and 1989.     Mrs. Vega has failed to

establish that (1) the deductions totaling $64,725 in 1988 and

$26,421 in 1989 were attributable to grossly erroneous items, and

(2) it would be inequitable to hold her liable for the amounts at
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issue.    Therefore, we sustain respondent's determinations and

discuss the grossly erroneous and inequitability requirements in

greater detail below.

     A.     Grossly Erroneous Requirement

     Under section 6013(e)(1)(B), Mrs. Vega must establish that

there was a substantial understatement of tax attributable to

grossly erroneous items of Mr. Vega in 1988 and 1989.    Respondent

concedes that for each year there was a substantial

understatement attributable to items of Mr. Vega.    As a result,

we need only consider whether the items were grossly erroneous.

     Respondent determined that the 1988 return understated gross

income from Schedule E by $1,952.    Because all items omitted from

gross income are considered grossly erroneous, the $1,952

understatement satisfies this requirement.    Sec. 6013(e)(2);

Flynn v. Commissioner, 93 T.C. 355 (1989).

     Respondent also disallowed claimed Schedule C deductions

totaling $64,725 in 1988 and $26,421 in 1989.    The deductions

will be considered grossly erroneous only if Mrs. Vega proves

they had no basis in fact or law.    Sec. 6013(e)(2).   She did not

produce any evidence on this point.     Mrs. Vega cannot rely on the

mere disallowance of the deductions or her inability to

substantiate them to establish a lack of basis in fact or law.

Douglas v. Commissioner, 86 T.C. 758, 763 (1986); Portillo v.

Commissioner, T.C. Memo. 1990-68, revd. in part, affd. in part,

and remanded 932 F.2d 1128 (5th Cir. 1991).    Consequently, she
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has not carried her burden of establishing that the deductions

were grossly erroneous.

     B.   Inequitability Requirement

     Under section 6013(e)(1)(D), Mrs. Vega must establish that

it would be inequitable to hold her liable for the deficiencies

in 1988 and 1989.   In deciding this matter, we consider whether

(1) she significantly benefited from the understatements; (2) Mr.

Vega had divorced, deserted, or separated from her; and (3) she

would face probable future hardships if relief were denied.

Makalintal v. Commissioner, T.C. Memo. 1996-9, and the cases

cited therein; Cousins v. Commissioner, T.C. Memo. 1995-129, and

the cases cited therein.

     Mrs. Vega lived with and was supported by her husband during

1988 and 1989.   She did not produce any evidence to disprove that

she significantly benefited from the understatements.       Although

her husband died in 1990, the record does not establish how much

property passed to Mrs. Vega under California's law of intestacy.

Therefore, she has not met her burden of proving that it would be

inequitable to hold her liable.

     Because Mrs. Vega has not satisfied every element of section

6013(e), she is not relieved of liability for the deficiencies

relating to 1988 and 1989.

     To reflect the foregoing,

                                              Decision will be entered

                                         for respondent.
