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or by transferring assets for the purpose of avoiding the
payment of tax by the use of this election. The
Committee believes that rules restricting the liability
of taxpayers to limit their liability in such situations
are appropriate. [Emphasis added.]
S. Rept. 105-174, at 55-56 (1998). Thus, the Senate Committee on
Finance equated “actual knowledge” with “knowingly signing [a] false
return”.
Third, Senator Graham said the following in offering amendments
to section 6015(c) (unanimously adopted by the Senate) on behalf
of himself and other Senate Committee on Finance members:
The primary exception [to allocable liability under
section 6015(c)] was that if the Secretary of the
Treasury could demonstrate–-and the burden is on the
Secretary of the Treasury to demonstrate-–that an
individual making this election to be taxed only for
their proportional share of the deficiency of the return,
that if they had actual knowledge of the conditions
within that return which led to this deficiency, then
they would be 100 percent responsible. [Senate Floor
Debate for Amendment No. 2369, 144 Cong. Rec. 56, S4473;
emphasis supplied]
Senator D’Amato, also a member of the Senate Committee on Finance,
said:
There were concerns, and rightly so, that some
taxpayers may try to abuse the innocent spouse rules by
knowingly signing false returns, or transferring assets
for the purpose of avoiding the payment of tax, and then
claim to be innocent. Obviously, no one would want to
open the door to that type of fraud. As such, language
was included in the bill that would prevent an individual
from electing the innocent spouse provision if they had
“actual knowledge of any item giving rise to a
deficiency.” [Emphasis added.]
Id.
Fourth, using language identical to that used by the Senate
Committee on Finance, the conference report states that a putative
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