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petitioner did not pay any taxes on her separate return share of
the income. Therefore, she received a tax benefit from
intervenor’s erroneous deductions that must be taken into account
in determining the extent to which petitioner is entitled to
relief from joint and several liability.
In order to determine the relief to which petitioner is
entitled, the parties must determine the proportion of the
erroneous Shorthorn partnership deduction that resulted in a tax
benefit to petitioner. The Shorthorn partnership deduction is
first attributed to intervenor to the extent of intervenor’s
separate return income. The balance of the deduction benefited
petitioner by reducing petitioner’s separate return income.
Petitioner is liable for the proportion of the deficiency equal
to the proportion of the total Shorthorn partnership deduction
which benefited her. For example, if petitioner benefited from
25 percent of the Shorthorn partnership deduction, she would be
liable for 25 percent of the deficiency and entitled to relief
from joint and several liability for 75 percent of the
deficiency. Any amounts previously collected from petitioner and
intervenor should be appropriately credited after determining
petitioner’s liability for the deficiency.
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