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at trial and observing her demeanor, we found her to be a
credible and earnest witness, and we are satisfied that her
testimony was truthful. Additionally, Mr. Rowe’s testimony was
consistent with petitioner’s claim that she was not aware of the
IRA or the distributions before 1995. The evidence in the record
indicates that Mr. Rowe opened the IRA in petitioner’s name and
concealed the account and the distributions from her.
Consequently, petitioner’s only apparent connection to the IRA
was that her name was listed as the owner of the account.
In the instant case, this item is allocable to Mr. Rowe, and
petitioner will be entitled to relief from joint liability under
section 6015(c), unless respondent shows that she had actual
knowledge of this item.9 We note Congress’s desire regarding
allocation in certain situations:
If the electing spouse establishes that he or she
did not know, and had no reason to know, of an item
and, considering all the facts and circumstances, it is
inequitable to hold the electing spouse responsible for
any unpaid tax or deficiency attributable to such item,
the item may be equitably reallocated to the other
spouse. * * * [S. Rept. 105-174, supra at 57, 1998-3
C.B. at 593.]
9On the basis of Mr. Rowe’s control and concealment of the
retirement account and the distributions, it appears that Mr.
Rowe, not petitioner, would have been required to report this
item if he had filed a separate return. See, e.g., James v.
United States, 366 U.S. 213, 219 (1961) (holding that embezzled
funds must be included in the embezzler’s gross income for
Federal income tax purposes in the year in which they were
misappropriated); Yerkie v. Commissioner, 67 T.C. 388, 390 (1976)
(same).
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