John A. Rowe and Donna L. Rowe - Page 16




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          Tax Regs., 66 Fed. Reg. 3888 (Jan. 17, 2001).  To date, no final            
          regulations have been issued.                                               
                    2.   Actual Knowledge                                             
               If the Commissioner demonstrates that an individual making             
          the election under section 6015(c) had “actual knowledge”, at the           
          time such individual signed the return, of any item giving rise             
          to a deficiency (or portion thereof) which is not allocable to              
          such individual under section 6015(d), the election under section           
          6015(c) will not apply to such deficiency (or portion).  Sec.               
          6015(c)(3)(C).  In the context of omitted income, the                       
          Commissioner must show that the electing spouse had an “actual              
          and clear awareness of the omitted income.”  Cheshire v.                    
          Commissioner, 115 T.C. 183, 195 (2000).  In the context of a                
          disallowed deduction, the Commissioner must show that the                   
          electing spouse had “actual knowledge of the factual                        
          circumstances which made the item unallowable as a deduction.”              
          King v. Commissioner, 116 T.C. 198, 204 (2001).  In either                  
          context, actual knowledge on the part of the electing spouse as             


               8(...continued)                                                        
          joint return, (2) one or both spouses commit fraud, (3) erroneous           
          items of income are present, and (4) erroneous deduction items              
          are present.  Sec. 1.6015-3(d)(2)(i)-(iv), Proposed Income Tax              
          Regs., supra.  With respect to situations involving omitted                 
          income and erroneous deduction items, the proposed regulations              
          provide language similar to that contained in the legislative               
          history.  Sec. 1.6015-3(d)(2)(iii), (iv), Proposed Income Tax               
          Regs., supra.  The proposed regulations omit Congress’s reference           
          to the equitable reallocation of an item where the electing                 
          spouse did not know, or have reason to know, of an item.                    





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