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to the deficiency or that the item reported on the return is
incorrect. Rather, the statute mandates only a showing that the
electing spouse actually knew of the item on the return that gave
rise to the deficiency (or portion thereof). See Wiksell v.
Commissioner, 215 F.3d 1335 (9th Cir. 2000) (“the actual knowledge
inquiry in section 6015(c)(3)(C) focuses on whether the taxpayer
had knowledge ‘of any item giving rise to a deficiency’, not on the
tax deficiency itself”; Court of Appeals held that spouse
demonstrated actual knowledge of certain tax items by questioning
her spouse about them), affg. without published opinion T.C. Memo.
1999-32. Here, when petitioner signed the joint return, she was
aware of the amount, the source, and the date of receipt of the
retirement distribution and interest. She was, however, under a
misapprehension as to the taxable amount of the retirement
distribution.
We believe the knowledge standard for purposes of section
6015(c)(3)(C) is an actual and clear awareness (as opposed to
reason to know) of the existence of an item which gives rise to the
deficiency (or portion thereof). In the case of omitted income
(such as the situation involved herein), the electing spouse must
have an actual and clear awareness of the omitted income.6
Section 6015(c)(3)(C) does not require actual knowledge on the part
6 We leave to another day the manner in which the actual
knowledge standard will be applied in erroneous deduction cases.
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