                           T.C. Memo. 1997-97



                         UNITED STATES TAX COURT


                  CATHY MILLER HARDY, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 17013-95.                    Filed February 25, 1997.


     William P. Koontz, for petitioner.

     Wendy S. Harris, for respondent.


              MEMORANDUM FINDINGS OF FACT AND OPINION

     CHIECHI, Judge:      Respondent determined the following defi-

ciencies in, and additions to, petitioner's Federal income tax:

                                       Additions to Tax
     Year     Deficiency       Sec. 6651(a)(1)1    Sec. 6654(a)

     1981      $10,369              $2,592             $794
     1982       10,090               2,523              982
     1983        9,580               2,395              586

1
   Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for each of the years in ques-
tion. All Rule references are to the Tax Court Rules of Practice
and Procedure.
                                 - 2 -

        1984       2,064              516              130
        1985       2,059              515              118
        1986       2,245              561              100

        On brief, respondent asks the Court to find the following

deficiencies in, and additions to, petitioner's Federal income

tax:2

                                       Additions to Tax
         Year    Deficiency    Sec. 6651(a)(1)    Sec. 6654(a)

         1983      $5,277            $641             $114
         1984       1,331             100                 3
         1985       2,059             515              118
         1986       1,8373            --               --

        The issues remaining for decision are:4

2
   Respondent also asserts on brief that petitioner has prepay-
ment credits of $2,714, $1,015, and $0 for 1983, 1984, and 1985,
respectively.
3
   Although respondent contends on brief that petitioner has un-
reported income for 1986 resulting in a deficiency for that year
of $1,837, she concedes that petitioner has a prepayment credit
of $2,626 and thus an overpayment of $789 for that year. How-
ever, respondent further contends that that overpayment for 1986
is barred by the statutory period of limitations. We shall not
address respondent's contentions about the deficiency or the
overpayment for 1986 because (1) the parties have stipulated that
there is no deficiency in, or additions to, petitioner's Federal
income tax for 1986, and (2) petitioner does not dispute, and we
conclude that she concedes, respondent's position that the over-
payment for 1986 is barred by the statutory period of limita-
tions.
4
   Petitioner contends for the first time in her answering brief
that she had a dependent during each of the years at issue for
whom she is entitled to a dependency exemption. It is well
settled that the Court will not consider issues raised for the
first time on brief when to do so would prevent the opposing
party from presenting evidence that that party might have prof-
fered if the issue had been timely raised. DiLeo v. Commis-
sioner, 96 T.C. 858, 891 (1991), affd. 959 F.2d 16 (2d Cir.
1992); Shelby U.S. Distribs, Inc. v. Commissioner, 71 T.C. 874,
                                                   (continued...)
                                   - 3 -

     (1)    Does petitioner have unreported income for 1983, 1984,

and 1985?    We hold that she does.

     (2)    Is petitioner liable for 1983, 1984, and 1985 for the

addition to tax for failure to file a return under section

6651(a)(1)?    We hold that she is.

     (3)    Is petitioner liable for 1983, 1984, and 1985 for the

addition to tax for failure to pay estimated tax under section

6654(a)?    We hold that she is.

                          FINDINGS OF FACT5

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

     Petitioner resided in Golconda, Nevada, at the time the

petition was filed.

     Petitioner did not file a Federal income tax return (return)

for the years at issue, nor did she at anytime make an attempt to

determine whether she was required to file a return for any of

those years.

     Petitioner, who is part German and part Native American and

who was raised in the Shoshone Indian culture, has a high school

education.    She has been married to Ray Hardy (Mr. Hardy) since

4
 (...continued)
885 (1979). Here, respondent had no opportunity to argue, let
alone present evidence, relating to petitioner's claim that she
is entitled to a dependency exemption for each of the years at
issue. Accordingly, we shall not consider that claim. We note
that even if we were to consider that claim, the record does not
contain any evidence to support it.
5
   Unless otherwise indicated, all of the facts that we have
found pertain to the years 1983, 1984, and 1985 (years at issue).
                                  - 4 -

November 22, 1981.   Since their marriage, petitioner and Mr.

Hardy have resided together in Nevada, a community property

State, and, except for short, temporary periods of time, have not

lived apart.

     Mr. Hardy was employed in the construction industry in

positions where he was responsible for operating machinery such

as cranes, loaders, and bulldozers.       Petitioner, who worked part-

time, was aware that Mr. Hardy was employed in the construction

industry.

     The following items and amounts of income were, and were

reported to respondent as having been, paid to and/or earned by

Mr. Hardy:

                           1983               1984           1985

Wages                  $47,840.38         $18,963.00     $44,233.00
Unemployment
   Compensation            --              3,318.00         632.00
Interest                   424.00            705.00         139.00

     Petitioner and Mr. Hardy lived in a trailer house titled in

his name that he had purchased at the time they were married.         At

various periods of time during the years at issue, the following

individuals lived with petitioner and Mr. Hardy in their trailer

house:   (1) Lorena Chessmore, petitioner's daughter from a

previous marriage, (2) Duncan, petitioner's son from a previous

marriage, (3) Ray Donald Hardy, Mr. Hardy's son from a previous

marriage, (4) Jeffrey Hardy, and (5) petitioner's parents.
                               - 5 -

     Petitioner and Mr. Hardy incurred various living expenses

(living expenses), including expenses for groceries, gasoline,

maintenance of the trailer house in which they lived, utilities,

and meals at restaurants, and each of them incurred certain

expenses that were attributable to their respective children.

Mr. Hardy used at least a portion of the income that was paid to

him to pay at least some of the living expenses (e.g., groceries,

gasoline, utilities, maintenance of the trailer house, and meals

at restaurants).

     Petitioner and Mr. Hardy did not have any house mortgage,

automobile loan, or medical expenses, nor did they give each

other any expensive or lavish gifts.

     During 1985, petitioner purchased a parcel of land in

Golconda, Nevada (Golconda land), on which she made a security

deposit of $1,100 and monthly mortgage payments of approximately

$300.   Petitioner obtained an $11,000 grant from the Shoshone

Indians that was used to buy the building materials that she and

Mr. Hardy utilized around 1985 to build a house on the Golconda

land.

     At no time during the years at issue or at any other rele-

vant time did petitioner and Mr. Hardy enter into a written

agreement to keep their respective property separate and not

subject to the community property law of the State of Nevada.
                                - 6 -

                               OPINION

Unreported Income

     Respondent determined in the notice of deficiency (notice),

inter alia, (1) that petitioner has unreported income for 1983

based on Bureau of Labor Statistics (BLS) and (2) that petitioner

has unreported income for 1984 and 1985 based upon one-half of

the community income paid to and/or earned by Mr. Hardy during

those years.   Respondent concedes that petitioner does not have

unreported income for 1983 based on BLS; however, she contends

that petitioner has unreported income for that year based on one-

half of the community income paid to and/or earned by Mr. Hardy

during that year.

     Since respondent's position with respect to petitioner's

unreported income for the years at issue rests on the application

of the community property law of the State of Nevada where peti-

tioner and Mr. Hardy resided at all relevant times, we shall

first discuss that law.    See United States v. Mitchell, 403 U.S.

190, 197 (1971).    Pursuant to Nevada law, community property

generally is any property acquired after marriage by either

spouse or by both spouses.    Nev. Rev. Stat. sec. 123.220 (1993).

All property acquired after marriage is presumed to be community

property.   Forrest v. Forrest, 99 Nev. 602, 604, 668 P.2d 275,

277 (1983).    That presumption may be rebutted, but only by clear

and convincing evidence, by the spouse claiming that property
                                 - 7 -

acquired during marriage is not community property.     Pryor v.

Pryor, 103 Nev. 148, 150, 734 P.2d 718, 719 (1987).     Income

earned by either spouse during marriage generally is community

property, regardless which spouse earns more income or which

spouse supports the community.     Robison v. Robison, 100 Nev. 668,

670, 691 P.2d 451, 453 (1984).    Married persons may enter into a

written agreement to keep their respective property separate and

not subject to Nevada's community property law.    Nev. Rev. Stat.

sec. 123.220 (1993); see also Nev. Rev. Stat. sec. 123.190

(1993).

     Spouses who are domiciled in a community property State like

Nevada generally are required to report and pay tax on one-half

of their community income, United States v. Mitchell, supra at

196, regardless whether they actually receive that income,

Furgatch v. Commissioner, 74 T.C. 1205, 1209 (1980).6

     We will sustain respondent's position with respect to

petitioner's unreported income for the years at issue if:

(1) Mr. Hardy has income for the years at issue; (2) the presump-

tion under Nevada law that that income is community income is not


6
   We thus reject petitioner's contention that requiring peti-
tioner to include in her gross income for the years at issue a
portion of the income paid to and/or earned by Mr. Hardy during
those years raises constitutional problems because petitioner
never received that income. Petitioner's contention also is
contrary to our finding that Mr. Hardy used at least a portion of
the income that was paid to him to pay at least some of the
living expenses.
                              - 8 -

rebutted by clear and convincing evidence; and (3) section 66(b)

and (c) does not apply in the instant case.

     Before focusing on the foregoing matters, we shall address

petitioner's contention, which respondent disputes, that respon-

dent has the burden of proving that Mr. Hardy has income for the

years at issue.7

     We conclude that respondent has the burden of proving that

Mr. Hardy has income for 1983, a new matter that respondent did

not determine in the notice,8 see Rule 142(a), and that peti-

tioner has the burden of proving error in respondent's determina-

tions in the notice that Mr. Hardy has income for 1984 and 1985,




7
   We do not understand petitioner to contend that respondent
also has the burden of proving (1) that the presumption under
Nevada law that the income paid to and/or earned by Mr. Hardy
during the years at issue is community income is not rebutted
and (2) that sec. 66(b) and (c) does not apply in the present
case. Even if we misunderstood petitioner's position regarding
who has the burden of proof on those two matters, we conclude
that (1) petitioner, who is the spouse claiming that the income
paid to and/or earned by Mr. Hardy during the years at issue is
not community income, has the burden under Nevada law to rebut by
clear and convincing evidence the presumption under that law that
that income is community income, see Pryor v. Pryor, 103 Nev.
148, 150, 734 P.2d 718, 719 (1987), and (2) petitioner, who
relies on sec. 66(b) and (c), has the burden of proving that she
has satisfied the requirements of that section. Cf. United
States v. Shanbaum, 10 F.3d 305, 311 (5th Cir. 1994).
8
   Petitioner does not even advance as a ground for her position
that respondent has the burden of proving that Mr. Hardy has
income for 1983 that that is a new matter that was not determined
in the notice.
                               - 9 -

see Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).9

We find all of petitioner's arguments regarding who has the

burden of proof to be without merit.   For example, petitioner

contends that the notice is arbitrary.   The only argument that

petitioner advances in support of that contention is that respon-

dent's concession of certain determinations in the notice renders

the notice arbitrary as to the remaining determinations therein.

We reject that contention.   See United States Holding Co. v.

Commissioner, 44 T.C. 323, 328 (1965).   We also reject peti-

tioner's contention that, in an unreported income case such as

the instant case, the burden of proof shifts to respondent merely

because, if it does not, petitioner would be required to prove a

negative.   See Rule 142(a); Rapp v. Commissioner, 774 F.2d 932,

935 (9th Cir. 1985), affg. an Order of this Court.10

     The Income Allegedly Paid to
     and/or Earned by Mr. Hardy
     During the Years at Issue

     Respondent has presented evidence establishing that during



9
   On the record before us, our findings with respect to whether
Mr. Hardy has income for the years at issue would remain the same
regardless who bears the burden of proof on that question.
10
   On the instant record, we find that respondent has come
forward with substantive evidence establishing an evidentiary
foundation for respondent's determinations in the notice that Mr.
Hardy has income for 1984 and 1985. See Rapp v. Commissioner,
774 F.2d 932, 935 (9th Cir. 1985), affg. an Order of this Court;
Weimerskirch v. Commissioner, 596 F.2d 358, 360 (9th Cir. 1979),
revg. 67 T.C. 672 (1977).
                              - 10 -

the years at issue, (1) Mr. Hardy was employed in the construc-

tion industry; (2) petitioner was aware that Mr. Hardy was

employed in the construction industry; (3) Mr. Hardy was paid

income from his employment; and (4) he used at least a portion of

that income to pay at least some of the living expenses.11     In

addition, the parties stipulated:   (1) Income totaling

$48,264.38, consisting of wages and interest, was reported to

respondent as having been paid to and/or earned by Mr. Hardy

during 1983; and (2) income totaling $22,986 and $45,004, con-

sisting of wages, unemployment compensation, and interest, was

reported to respondent as having been paid to and/or earned by

Mr. Hardy during 1984 and 1985, respectively.   Petitioner has

made no attempt to, and has not, come forward with any evidence

indicating that that income was not paid to and/or earned by Mr.

Hardy during those years.   Indeed, petitioner does not even

dispute that the income that was reported to respondent as having

been paid to and/or earned by Mr. Hardy during the years at issue

was paid to and/or earned by him during those years.   Instead,

petitioner chooses to rely on her questionable assertion that she

had no way of obtaining and presenting evidence at trial relating


11
   Respondent subpoenaed Mr. Hardy as a witness at the trial in
this case. During his testimony, Mr. Hardy invoked, and the
Court sustained in certain respects, his claim under the Fifth
Amendment to the U.S. Constitution with respect to answering
certain questions concerning his employment during the years at
issue.
                             - 11 -

to whether the income so reported to respondent was in fact paid

to and/or earned by Mr. Hardy.

     In her answering brief filed on August 26, 1996, petitioner

contends that, pursuant to section 6201(d), respondent must

produce "reasonable and probative information" concerning the

income that was allegedly paid to and/or earned by Mr. Hardy

during the years at issue other than the parties' stipulation

that certain income was reported to respondent as having been

paid to and/or earned by him during those years.

     Section 6201(d) provides:

     In any court proceeding, if a taxpayer asserts a rea-
     sonable dispute with respect to any item of income
     reported on an information return filed with the Secre-
     tary under subpart B or C of part III of subchapter A
     of chapter 61 by a third party and the taxpayer has
     fully cooperated with the Secretary (including provid-
     ing, within a reasonable period of time, access to and
     inspection of all witnesses, information, and documents
     within the control of the taxpayer as reasonably re-
     quested by the Secretary), the Secretary shall have the
     burden of producing reasonable and probative informa-
     tion concerning such deficiency in addition to such
     information return.

That section became effective on the date of its enactment, which

was July 30, 1996.

     Assuming arguendo that section 6201(d) were applicable in

the present case,12 it nonetheless would not require respondent



12
   We note that petitioner filed a petition with this Court on
Aug. 30, 1995, and the trial in the instant case was held on May
23, 1996.
                               - 12 -

to produce "reasonable and probative information" concerning the

deficiency for each year at issue in addition to the parties'

stipulation in this case about the information returns with

respect to Mr. Hardy that were filed with respondent for each

such year.13   That is because we conclude that petitioner has not

asserted "a reasonable dispute with respect to any item of

income" that was reported to respondent as having been paid to

and/or earned by Mr. Hardy and has not shown that she "fully

cooperated" with respondent.

     On the record before us, we find that during 1983, 1984, and

1985 income of $48,264.38, $22,986,14 and $45,004, respectively,

was paid to and/or earned by Mr. Hardy.   Although we have found

that during 1985 income of $45,004 was paid to and/or earned by

Mr. Hardy, respondent's determination of the deficiency for 1985

(viz., $2,059) was based upon one-half of only $29,684 of commu-

nity income of Mr. Hardy.   Respondent does not claim a deficiency

for 1985 in an amount greater than that determined in the notice.

Accordingly, we conclude that respondent is not claiming that Mr.


13
   As stated above, respondent did present evidence, in addition
to the parties' stipulation that certain income was reported to
respondent as having been paid to and/or earned by Mr. Hardy
during the years at issue, to support her contention that Mr.
Hardy has income for those years.
14
   Although respondent determined a deficiency for 1984 based on
one-half of Mr. Hardy's community income of $27,608, on brief,
she claims a deficiency for that year based on one-half of Mr.
Hardy's community income of only $22,986.
                              - 13 -

Hardy has income for 1985 in an amount greater than that deter-

mined in the notice (viz., $29,684) on which the deficiency

determined therein and claimed herein is based.   Hereinafter,

unless otherwise indicated, any reference to the income paid to

and/or earned by Mr. Hardy during 1983, 1984, and 1985 shall be

to such income of $48,264.38, $22,986, and $29,684, respectively.

     Alleged Oral Agreement Between
     Petitioner and Mr. Hardy

     Although petitioner does not dispute that any income that

was paid to and/or earned by Mr. Hardy during the years at issue

is presumed to be community income under Nevada's community

property law, she contends that (1) at the time of her marriage

to Mr. Hardy, she and Mr. Hardy entered into an oral agreement to

keep their respective property separate, and (2) accordingly, the

income that was paid to and/or earned by Mr. Hardy during those

years is not community income.   Respondent disputes the existence

of such an oral agreement.   Respondent further maintains that,

even assuming arguendo that petitioner and Mr. Hardy had entered

into such an agreement, income paid to and/or earned by Mr. Hardy

during the years at issue would nonetheless constitute community

income for Federal income tax purposes because, under Nevada law,

an agreement between spouses to keep their respective property

separate is not effective against a third party, such as respon-

dent, unless it is in writing and is recorded.
                              - 14 -

     We need not, and do not decide, whether, under Nevada law,

an oral agreement between spouses to keep their respective

property separate is effective against respondent.   That is

because, regardless how that issue is resolved under Nevada law,

we nonetheless find on the record before us that petitioner has

not established by clear and convincing evidence, as required by

that law, Pryor v. Pryor, 103 Nev. at 150, 734 P.2d at 719, that

during the years at issue she and Mr. Hardy did, in fact, have an

oral agreement to keep their respective property separate.15    In

this regard, we find it significant that the record contains no

evidence relating to the specific terms of the alleged oral

agreement between petitioner and Mr. Hardy.   It is also sig-

nificant that:   (1) Mr. Hardy testified at a deposition in the


15
   Petitioner attempted to show that during the years at issue
she and Mr. Hardy had an oral agreement to keep their respective
property separate through her own testimony and the testimony of
the following witnesses: (1) Her husband, Mr. Hardy, (2) her
daughter, Lorena Chessmore, (3) her cousin, Oscar Johnny, and
(4) Mr. Hardy's son, Ray Donald Hardy. We conclude that peti-
tioner's attempt failed. We did not find the testimony of either
petitioner or Mr. Hardy to be credible. Indeed, their respective
testimony at the trial in this case was inconsistent in certain
material respects with their respective testimony at depositions
taken in connection with a Federal tax proceeding in the U.S.
District Court for the District of Nevada (District Court pro-
ceeding). We found the testimony of petitioner's daughter and
cousin and Mr. Hardy's son to be at times general, vague, and
conclusory, and we did not find their testimony particularly
helpful to petitioner's position that Mr. Hardy and she had an
oral agreement during the years at issue to keep their respective
property separate. Indeed, none of them testified that petition-
er and Mr. Hardy had such an agreement during those (or any
other) years.
                                - 15 -

District Court proceeding that petitioner and he did not enter

into an agreement to keep their respective property separate, and

(2) Mr. Hardy used at least a portion of the income that was paid

to him during the years at issue to pay at least some of the

living expenses (e.g., groceries, gasoline, utilities, mainte-

nance of the trailer house, and meals at restaurants).16

     Based on the record before us, we conclude that petitioner

has not, as required by Nevada law, rebutted by clear and

convincing evidence the presumption under that law that the

income paid to and/or earned by Mr. Hardy during 1983, 1984, and

1985 is community income.    On that record, we sustain respon-

dent's position that such income is community income.

     Section 66(b) and (c)

     Petitioner contends that, assuming arguendo that the income

paid to and/or earned by Mr. Hardy during the years at issue

constitutes community income, section 66(b) and (c) nonetheless

relieves her from including any portion of that income in her

gross income for those years.    Respondent disagrees.



16
   Petitioner claims that any transfer of property by Mr. Hardy
to her constituted a gift. Based on our review of the record in
this case, we are not persuaded that any such transfer consti-
tuted a gift. Rather, based on that review, we find that Mr.
Hardy's willingness to use the income that was paid to him during
the years at issue to pay at least some of the living expenses
supports respondent's position that that income is community in-
come. See Jensen v. Jensen, 104 Nev. 95, 98, 753 P.2d 342, 344
(1988).
                              - 16 -

     Section 66(b) and (c) provides:

          (b) SECRETARY MAY DISREGARD COMMUNITY PROPERTY
     LAWS WHERE SPOUSE NOT NOTIFIED OF COMMUNITY INCOME.--
     The Secretary may disallow the benefits of any commu-
     nity property law to any taxpayer with respect to any
     income if such taxpayer acted as if solely entitled to
     such income and failed to notify the taxpayer's spouse
     before the due date (including extensions) for filing
     the return for the taxable year in which the income was
     derived of the nature and amount of such income.

          (c) SPOUSE RELIEVED OF LIABILITY IN CERTAIN OTHER
     CASES.--Under regulations prescribed by the Secretary,
     if--

                (1) an individual does not file a joint
           return for any taxable year,

                (2) such individual does not include in
           gross income for such taxable year an item of
           community income properly includible therein
           which, in accordance with the rules contained in
           section 879(a), would be treated as the income of
           the other spouse,

                (3) the individual establishes that he or
           she did not know of, and had no reason to know of,
           such item of community income, and

                (4) taking into account all facts and cir-
           cumstances, it is inequitable to include such item
           of community income in such individual's gross
           income,

     then, for purposes of this title, such item of commu-
     nity income shall be included in the gross income of
     the other spouse (and not in the gross income of the
     individual).

     As for petitioner's reliance on section 66(b), that section

is applicable only to taxable years beginning after December 31,

1984.   Sec. 424(c)(2) of the Deficit Reduction Act of 1984, Pub.

L. 98-369, 98 Stat. 803.   Consequently, section 66(b) is not even
                              - 17 -

effective for, and can in no event support petitioner's position

regarding, petitioner's taxable years 1983 and 1984.    Section

66(b) is, however, effective for petitioner's taxable year 1985.

Nonetheless, we reject petitioner's argument that, because

respondent previously determined deficiencies and assessed tax

against Mr. Hardy with respect to the income that was paid to

and/or earned by Mr. Hardy during the years at issue, she is

relieved under section 66(b) from including any of that income in

her gross income.   That argument is misdirected.17   Section 66(b)

does not provide any relief for petitioner's taxable year 1985.

That section is not a relief provision and can be used only by

respondent in order to disallow the benefits of community prop-

erty laws to a taxpayer under certain prescribed conditions; it

cannot be used by a taxpayer in order to avoid his or her liabil-

ity for tax on community income paid to and/or earned by that

taxpayer's spouse.18

     As for petitioner's reliance on section 66(c), respondent

contends that although petitioner satisfies the first two re-

17
   Petitioner's argument also ignores that respondent represent-
ed in her trial memorandum, which the Court had filed in this
case, that she will abate the tax assessed against Mr. Hardy if
the Court were to find that the income that was paid to and/or
earned by him during the years at issue is community income, one-
half of which is includible in petitioner's gross income for
those years.
18
   See Drummer v. Commissioner, T.C. Memo. 1994-214, affd.
without published opinion 68 F.3d 472 (5th Cir. 1995); Rutledge
v. Commissioner, T.C. Memo. 1992-52, affd. without published
opinion 4 F.3d 990 (5th Cir. 1993).
                              - 18 -

quirements in section 66(c)(1) and (2), she does not satisfy the

last two requirements in section 66(c)(3) and (4).   We agree with

respondent.

     With respect to the requirement in section 66(c)(3), on the

present record, we find (1) that petitioner knew, or had reason

to know, about the compensation that was paid to Mr. Hardy during

the years at issue and (2) that petitioner has failed to show

that she did not know, and had no reason to know, about the in-

terest that was paid to and/or earned by Mr. Hardy during those

years or the unemployment compensation that was paid to him

during 1984 and 1985.   In this connection, we note that peti-

tioner's knowledge of an item of community income must be deter-

mined with reference to her knowledge of the particular income-

producing activity.   See McGee v. Commissioner, 979 F.2d 66, 70

(5th Cir. 1992), affg. T.C. Memo. 1991-510.   We have found that

during the years at issue, (1) Mr. Hardy was employed in the con-

struction industry; (2) petitioner was aware that Mr. Hardy was

employed in the construction industry; (3) income was reported to

respondent as having been, and was, paid to and/or earned by Mr.

Hardy; and (4) Mr. Hardy used at least a portion of the income

that was paid to him to pay at least some of the living expenses.

Although petitioner claims that she was not aware of the exact

amount of the income that was paid to and/or earned by Mr. Hardy

during the years at issue, "a spouse's unawareness of the exact

amount of an item of community income is not determinative of
                               - 19 -

knowledge for purposes of section 66(c)".   Id. at 70.

     With respect to the requirement in section 66(c)(4), on the

present record, we find that it would not be inequitable to in-

clude in petitioner's gross income for the years at issue one-

half of the income that was paid to and/or earned by Mr. Hardy

during those years.19   The legislative history of section

66(c)(4) indicates that one of the factors to be taken into ac-

count in making a determination under that section is "whether

the spouse [who is seeking relief under section 66(c)] benefitted

from the untaxed income".   H. Rept. 98-432, at 1503 (1984).   We

have found that Mr. Hardy used at least a portion of the income

that was paid to him during the years at issue to pay at least

some of the living expenses.   On the record before us, we find

that petitioner benefited from the income that was paid to and/or

earned by Mr. Hardy during those years.

     Based on our review of the entire record in the instant

case, we find that neither section 66(b) nor section 66(c)


19
   Petitioner contends that it would be inequitable to include
in her gross income for the years at issue a portion of the in-
come paid to and/or earned by Mr. Hardy during those years
because respondent previously determined deficiencies and as-
sessed tax against Mr. Hardy with respect to that income, and
such inclusion would result in double taxation of the same in-
come. Assuming arguendo that double taxation of the same income
were a relevant consideration for purposes of sec. 66(c)(4),
respondent has represented that she would abate the tax assessed
against Mr. Hardy if the Court were to find against petitioner on
the community income issue, see supra note 17, and, in that
event, there would be no double taxation of the same income.
                              - 20 -

permits petitioner to exclude from her gross income for 1983,

1984, and 1985 a portion of the income that was paid to and/or

earned by Mr. Hardy during those years.    On that record, we

sustain (1) respondent's position that petitioner has unreported

income of $24,132.19 for 1983, (2) respondent's determination, as

reduced on brief, that petitioner has unreported income of

$11,493 for 1984, and (3) respondent's determination that peti-

tioner has unreported income of $14,842 for 1985.

Additions to Tax

     Section 6651(a)(1)

     Respondent determined that petitioner is liable for each of

the years at issue for the addition to tax under section

6651(a)(1) because she failed to file a return for each such

year.   The addition to tax under section 6651(a)(1) does not

apply if it is shown that the failure to file was due to reason-

able cause, and not due to willful neglect.

     Although petitioner's position is not altogether clear, she

appears to contend that her failure to file a return was due to

reasonable cause, and not willful neglect, because she did not

know, and Mr. Hardy never informed her, that she had to report

and pay tax on a portion of the income that was paid to and/or

earned by him during the years at issue.

     On the instant record, we reject petitioner's contention.

Petitioner was aware that Mr. Hardy was employed in the construc-

tion industry during the years at issue, and Mr. Hardy used at
                               - 21 -

least a portion of the income that was paid to him during those

years to pay at least some of the living expenses.    Petitioner

also worked during the years at issue.    However, petitioner did

not at anytime make an attempt to determine whether she was

required to file a return for any of those years.

     On the record before us, we find that petitioner's failure

to file returns for the years at issue was not due to reasonable

cause.    Accordingly, we sustain respondent's determinations, as

reduced on brief by respondent, imposing the addition to tax

under section 6651(a)(1) for each of those years.20

     Section 6654(a)

     Respondent determined that petitioner is liable for each of

the years at issue for the addition to tax under section 6654(a)

because she failed to pay estimated taxes for each such year.

The addition to tax under section 6654(a) is mandatory unless the

taxpayer establishes that one of the exceptions under section

6654(e) applies.    Grosshandler v. Commissioner, 75 T.C. 1, 20-21

(1980).    Petitioner does not claim, and the record does not

support a finding, that any of the exceptions under section

6654(e) applies.

     On the record before us, we sustain respondent's determina-

20
   Although not altogether clear, there may be a disagreement
between the parties about the amounts of the prepayment credits
for the years at issue to which petitioner is entitled in comput-
ing the additions to tax under sec. 6651(a), as well as sec.
6654(a). We direct the parties to resolve any such disagreement
in their computations under Rule 155.
                              - 22 -

tions, as reduced on brief by respondent, imposing the additions

to tax under section 6654(a) for each of the years at issue.21

      To reflect the foregoing and the concessions of the parties,


                                    Decision will be entered

                               under Rule 155.




21
     See supra note 20.
