John A. Rowe and Donna L. Rowe - Page 14




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          shall be allocated to the other spouse filing the joint return to           
          the extent the item gave rise to a tax benefit on the joint                 
          return to the other spouse.  Section 6015(d)(3)(C) permits the              
          Secretary to allocate items other than in the manner described in           
          6015(d)(3)(A) if the Secretary establishes that such allocation             
          is appropriate due to fraud of one or both spouses.                         
               Congress has authorized the Secretary to prescribe                     
          regulations providing methods of allocation other than the                  
          methods provided in section 6015(d)(3).  Sec. 6015(g)(1); see               
          also S. Rept. 105-174, supra at 56-57, 1998-3 C.B. at 592-593; H.           
          Conf. Rept. 105-599, supra at 251, 1998-3 C.B. at 1005.  Congress           
          provided the following guidance regarding the types of                      
          alternative methods of allocating items between spouses:                    
                    Under the bill, allocation of items of income and                 
               deduction follows the present-law rules determining                    
               which spouse is responsible for reporting an item when                 
               the spouses use the married, filing separate filing                    
               status.  The Secretary of the Treasury is granted                      
               authority to prescribe regulations providing simplified                
               methods of allocating items.                                           
                    In general, apportionment of items of income are                  
               expected to follow the source of the income.  Wage                     
               income is allocated to the spouse performing the job                   
               and receiving the Form W-2.  Business and investment                   
               income (including any capital gains) is allocated in                   
               the same proportion as the ownership of the business or                
               investment that produces the income.  Where ownership                  
               of the business or investment is held by both spouses                  
               as joint tenants, it is expected that any income is                    
               allocated equally to each spouse, in the absence of                    
               clear and convincing evidence supporting a different                   
               allocation.                                                            
                    The allocation of business deductions is expected                 
               to follow the ownership of the business.  Personal                     
               deduction items are expected to be allocated equally                   





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