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unallowable, because Hoyt engaged in a fraudulent
scheme to deceive them and it was the fraudulent scheme
that caused the tax items to be unallowable. The Hoyt
investors were adjudged to be victims of a fraud, which
by definition means they were deceived as to the nature
of their investment and the facts giving rise to the
disallowance of their investment related tax
deductions.
The cover letter attached to petitioner’s administrative appeal
stated that “We will provide additional factual information once
we are contacted by the Appeals Officer.”
On September 9, 2002, the Appeals Office issued a Notice of
Determination Concerning Your Request for Relief Under the
Equitable Relief Provision of Section 6015(f) (notice of
determination) denying petitioner’s request for relief under
section 6015. Although the notice of determination referenced
only section 6015(f), the explanation of adjustments addressed
petitioner’s claim for relief under section 6015(b), (c), and
(f). The explanation of adjustments stated as follows with
respect to petitioner’s request for relief under section 6015(c):
IRC SECTION 6015(c)--Election to Allocate Deficiency
This subsection is commonly called “separation of
liability” which prorates a deficiency between spouses
filing a joint return based on their proportionate
share of earnings. Under this section, the requesting
spouse must establish certain conditions before a
relief [sic] can be granted. Even if you meet the
requirements for being a widow, your request for
separation of liability will not be granted because you
had actual knowledge or the reason to know of the items
giving rise to the deficiency that were allocable to
your spouse. [Emphasis added.]
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