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We do not agree with petitioner’s standard of inquiry. The no
knowledge of the understatement requirement of section
6015(b)(1)(C) is similar to that found in former section
6013(e)(1)(C). Where relief was requested under section 6013(e)
with respect to the omission of income (the situation involved
herein), both this Court and the Court of Appeals for the Fifth
Circuit, the court to which an appeal in this case would lie, have
concluded that where a spouse seeking relief has actual knowledge
of the underlying transaction that produced the omitted income,
innocent spouse relief is denied. See Reser v. Commissioner, 112
F.3d 1258, 1265 (5th Cir. 1997), affg. in part and revg. in part
T.C. Memo. 1995-572; Bokum v. Commissioner, 94 T.C. 126, 148
(1990), affd. 992 F.2d 1132 (11th Cir. 1993). We believe this
standard applies for section 6015(b)(1) relief as well.
Here, petitioner possessed actual knowledge of the underlying
transactions (the distribution of retirement proceeds and the
interest earned on the Austin Telco account) that gave rise to the
Cheshires’ understatement of tax. Petitioner had been informed by
Mr. Cheshire that he was contemplating retirement and was eligible
to receive a substantial sum of money from his retirement plan. By
the end of January 1992, petitioner was aware of both the
retirement distribution proceeds and the existence of the Austin
Telco account. In fact, Mr. Cheshire showed petitioner the deposit
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