Ruby Chico isn’t stacked, despite the unreported income in the deficiency, and fraud chops visited upon her husband Raymond, and ex-Ch J Michael B (“Iron Mike”) Thornton will tell you why in Raymond Chico and Ruby Chico, 2019 T. C. Memo. 123, filed 9/16/19.

Ray was a tax preparer who went to pot, selling marijuana cigarette holders of his own design (fetchingly called “doobtubes”) and running a pottery. The problem was he wasn’t declaring income from these operations, and wasn’t keeping good records.

Ray gets the Section 6663 fraud chops.

“Respondent has not asserted fraud penalties against Ms. Chico but alleges that she is liable for the section 6662(a) accuracy-related penalty for each year at issue.

“The accuracy-related penalty cannot be imposed on one spouse where the other spouse is liable for the fraud penalty, as this would lead to impermissible stacking of penalties. See sec. 6662(b); Said v. Commissioner, T.C. Memo. 2003-148. Because Mr. Chico is liable for the fraud penalty for each underpayment, Ms. Chico is not liable for the accuracy-related penalties.” 2019 T. C. Memo. 123, at p. 49.