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explanation for disallowing the remaining $13,155 claimed as
deductible home mortgage interest:
It is determined that $13,155 of home mortgage interest
expense claimed on Schedule A in the 1988 tax year is
disallowed because this amount relates to one of your
rental properties and has already been deducted on
Schedule E. Thus, this mortgage interest must be
disallowed from Schedule A to prevent it from being
deducted twice.
Accordingly, your taxable income for the 1988 tax year
is increased by $13,155.
Thus, in order to establish actual knowledge, respondent must
show that petitioner knew or believed that $13,155 of the claimed
mortgage interest was unallowable because it was already listed
on Schedule E.
Respondent claims that petitioner had actual knowledge of
the existence and the amount of the home mortgage interest
payments in 1988 because she also wrote the checks to pay the
mortgage interest for that year. Petitioner agrees that she knew
of the mortgage; however, she claims that she was unaware of the
amount of interest paid or that it was incorrectly reported on
the tax return. Petitioner testified that she received the first
two pages only of the tax return and that she did not see any
attached schedules or other documentation. Respondent failed to
present evidence showing that petitioner had actual knowledge
that the 1988 mortgage interest was overstated because the
$13,155 had already been listed as a rental expense on Schedule
E. Therefore, we find that petitioner did not have actual
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