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did not know, and had no reason to know, that
there was such understatement;
(D) taking into account all the facts and
circumstances, it is inequitable to hold the other
individual liable for the deficiency in tax for
such taxable year attributable to such
understatement, and
(E) the other individual elects (in such form as
the Secretary may prescribe) the benefits of this
subsection not later than the date which is
2 years after the date the Secretary has begun
collection activities with respect to the
individual making the election,
then the other individual shall be relieved of
liability for tax (including interest, penalties, and
other amounts) for such taxable year to the extent such
liability is attributable to such understatement.
B. Application to Barbara
1. In General
Respondent does not dispute that Barbara satisfies the
requirements of subparagraphs (A), (B), and (E) of section
6015(b)(1). The parties disagree as to whether Barbara satisfies
the requirements of subparagraphs (C) and (D); viz, whether
(1) Barbara had actual or constructive knowledge of the
understatements of tax (here, equal to the deficiencies (the
understatements)) attributable to the losses and (2) is entitled
to equitable relief.
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