John P. Crowley and Elizabeth R. Cockrell - Page 4

                                        - 4 -                                         
          Pub. L. 100-647, 102 Stat. 3685-3686 (transitional rule).5                  

          5                                                                           
               The transitional rule provides as follows:                             
          Sec. 6004.  TREATMENT OF CERTAIN INNOCENT SPOUSES                           
                    Subsection (c) of section 424 of the Tax Reform                   
               Act of 1984 (relating to innocent spouse relieved of                   
               liability in certain cases) is amended by adding at the                
               end thereof the following new paragraph:                               
               "(3) Transitional Rule.--If--                                          
                    "(A) a joint return under section 6013 of the                     
               Internal Revenue Code of 1954 was filed before January                 
               1, 1985,                                                               
                    "(B) on such return there is an understatement (as                
               defined in section 6661(b)(2)(A) of such Code) which is                
               attributable to disallowed deductions attributable to                  
               activities of one spouse,                                              
                    "(C) the amount of such disallowed deductions                     
               exceeds the taxable income shown on such return,                       
                    "(D) without regard to any determination before                   
               October 21, 1988, the other spouse establishes that in                 
               signing the return he or she did not know, and had no                  
               reason to know, that there was such an understatement,                 
               and                                                                    
                    "(E) the marriage between such spouses terminated                 
               and immediately after such termination the net worth of                
               the other spouse was less than $10,000,                                
               notwithstanding any law or rule of law (including res                  
               judicata), the other spouse shall be relieved of                       
               liability for tax (including interest, penalties, and                  
               other amounts) for such taxable year to the extent such                
               liability is attributable to such understatement, and,                 
               to the extent the liability so attributable has been                   
               collected from such other spouse, it shall be refunded                 
               or credited to such other spouse.  No credit or refund                 
               shall be made under the preceding sentence unless claim                
               therefor has been submitted to the Secretary of the                    
               Treasury or his delegate before the date 1 year after                  
                                                             (continued...)           




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