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owned Mike’s Painting, and, as more fully explained later, the
evidence does not indicate that petitioner was involved in the
business. Rowe v. Commissioner, T.C. Memo. 2001-325; Charlton v.
Commissioner, supra. Thus, petitioner is entitled to the relief
which she and respondent have agreed to unless it is shown that
petitioner had “actual knowledge”, at the time she signed the
return, of any item giving rise to a deficiency (or portion
thereof) which is not allocable to her.3 Sec. 6015(c)(3)(C).
Because the instant case involves disallowed deductions, it must
be shown that petitioner had actual knowledge of the factual
circumstances which made the business expenses unallowable as
deductions. King v. Commissioner, 116 T.C. 198, 204 (2001).
Petitioner contends that she was not involved with Mike’s
Painting, she did not have access to intervenor’s business
records, and she did not know he maintained an office for the
business in Lexington, Kentucky. Petitioner claims she did not
have any idea of the tax liability attributable to Mike’s
Painting and points out that her name was not on any of the
accounts related to the business. Intervenor argues that
petitioner was aware of everything about Mike’s Painting and that
she assisted in running the business and keeping track of
3As previously mentioned on supra pp. 4-5, items giving rise
to a deficiency that are allocable to intervenor must also be
allocated to petitioner to the extent she received a “tax
benefit” from the items on the joint return. Sec. 6015(d)(3)(B).
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