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distributions were a nontaxable inheritance from Ms. Braden’s
father, we conclude that petitioner did not have sufficient
knowledge of the transaction generating the understatement to
give him knowledge or reason to know of the understatement.
We hold that petitioner has satisfied the no knowledge of
the understatement requirement of section 6015(b)(1)(C).
C. The Equitable Requirement of Section 6015(b)(1)(D)
We now turn to the final contested requirement, section
6015(b)(1)(D). Respondent contends that, since a portion of the
funds distributed to Ms. Braden was used to purchase furniture
and furnishings for petitioners’ family home and to pay for
improvements to the home, petitioner benefited from the
understatement. Respondent argues, therefore, that it would not
be inequitable to hold petitioner liable for the deficiency in
tax attributable to the understatement. We disagree.
We must evaluate all of the facts and circumstances in
deciding whether it is inequitable to hold a taxpayer liable for
the deficiency under the relief provisions of section 6015(b)(1).
See sec. 6015(b)(1)(D). Since section 6015(b)(1)(D) is
substantially identical to former section 6013(e)(1)(D), we may
look to cases applying former section 6013(e)(1)(D) to inform our
analysis under section 6015(b)(1)(D). See Butler v.
Commissioner, 114 T.C. 276 (2000).
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