- 34 -
is ambiguous; the “item” of which the putative innocent spouse must
have had actual knowledge could be either of two things. First, it
might refer to a transaction or activity. If so, then, as
respondent contends, see majority op. at 18, a putative innocent
spouse would not qualify for the separate liability election under
section 6015(c) if the Commissioner showed that he or she knew that
an income-producing transaction or activity had occurred.
Alternatively, knowledge of an “item giving rise to a
deficiency” might refer to knowledge that an entry on a tax return
was incorrect. Under this interpretation, the putative innocent
spouse would not be disqualified under section 6015(c) merely
because he or she knew that the income-producing transaction or
activity giving rise to the deficiency had occurred. Instead, the
Commissioner would be required to show that the electing spouse had
actual knowledge that the treatment of the item on the tax return
was incorrect.1
1 That “item giving rise to a deficiency” could be
reasonably construed in either of these ways is demonstrated by
the fact that the Internal Revenue Code uses the term “item” to
refer both to an underlying activity and to the tax return
treatment of an activity. As an example of the former, sec.
61(a) provides that–
SEC. 61(a). * * * Except as otherwise provided
in this subtitle, gross income means all income from
whatever source derived, including (but not limited to)
the following items:
(1) Compensation for services, including
fees, commissions, fringe benefits, and
(continued...)
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