Patricia M. Mora, F.K.A. Patricia Rasberry - Page 22




                                       - 22 -                                         
          has the burden of proving by a preponderance of the evidence that           
          petitioner, at the time of signing the returns, had actual                  
          knowledge of the items giving rise to the deficiency that                   
          otherwise would have been allocated solely to intervenor under              
          the separate return rule.  See sec. 6015(c)(3)(C) (“If the                  
          Secretary demonstrates * * * actual knowledge”); Culver v.                  
          Commissioner, supra.                                                        
               In King v. Commissioner, 116 T.C. 198, 203 (2001), this                
          Court considered the standard for “actual knowledge of the item             
          giving rise to the deficiency” applicable to erroneous deductions           
          under section 6015(c)(3)(C).  There, the taxpayer filed a joint             
          return with her husband, Curtis Freeman, and claimed significant            
          losses from Freeman’s cattle ranching operations.  The taxpayer             
          knew that the cattle ranch was not profitable but did not know              
          that Freeman lacked a profit motive for engaging in the activity,           
          which was the critical fact underlying the Commissioner’s                   
          determination that Freeman was not entitled to deduct the losses            
          under section 183.  This Court held that the taxpayer was                   
          entitled to relief under section 6015(c), even though the                   
          taxpayer was aware of the activity giving rise to the erroneous             
          deduction (the cattle ranching activity) because she did not know           
          the predicate facts causing the losses to be nondeductible (i.e.            
          her husband’s lack of a profit motive):                                     
                 The question in this case, therefore, is not                         
               whether petitioner knew the tax consequences of a not-                 





Page:  Previous  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  27  Next

Last modified: May 25, 2011