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(the Shorthorn partnership losses) are attributable to
intervenor’s activities and his partnership interest, he cannot
avoid his liability for the deficiency by filing a request for
relief under section 6015(c), even if he lacked knowledge of the
facts giving rise to the deduction.
It is appropriate to apply the King standard to limited
partnership investments made by the nonrequesting spouse in
allocating liabilities based on the “separate return” standard in
section 6015(c). The “actual knowledge” test in section
6015(c)(3)(C) is an exception to the general rule under which
items resulting in the deficiency are allocated as if the spouses
had filed separate returns. The statute makes no distinction
between active and passive investments, and we see no legal basis
and no policy reason for creating a judicial distinction.
Therefore, the Shorthorn partnership losses, which are
attributable solely to intervenor’s activities and partnership
interest, should not also be attributed to petitioner under
section 6015(c)(3)(C) merely because both petitioner and
intervenor, rather than just petitioner, lacked actual knowledge
of the facts giving rise to the disallowance of the losses.
B. The Tax Benefit Exception
Section 6015(d)(3)(B) contains an exception to the general
rule that items are to be attributed to the spouses in the same
manner as they would have been had the spouses filed separate
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