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understatement of tax is not a problem under our disposition of
this case.
If a taxpayer had actual knowledge of the items giving rise
to the deficiency, then the taxpayer will not qualify for relief
under section 6015(b) or section 6015(c). Sec. 6015(b)(1)(C) and
(c)(3)(C). On this record, we are convinced that both Gary and
Jolene knew that they were claiming unwarranted rental and other
business expense deductions on their 1996 and 1997 returns and
excessive itemized deductions on their 1996 return, and that
these claimed deductions led to the understatements in question.
Both petitioners were involved in and responsible for the
preparation of their returns. Jolene was involved in the
bookkeeping of the electrician business. Both petitioners knew
what the expenses of the business were. They knew the business
rent deduction exceeded the amount they paid in rent for the
entire house they occupied. Thus, each petitioner fails to
qualify for relief under either section 6015(b) or section
6015(c). We find that neither petitioner is entitled to relief
under section 6015.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.
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Last modified: May 25, 2011