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2. Section 6015(b)(1)(C)
a. Introduction
(1) Similarity to Section 6013(e)
The no-knowledge-of-the-understatement requirement of
section 6015(b)(1)(C) is similar to the corresponding requirement
in former section 6013(e)(1)(C). Cheshire v. Commissioner, 115
T.C. 183, 192 (2000). Both provisions require the relief-seeking
spouse to establish that “in signing the return, he or she did
not know, and had no reason to know” of the understatement.
Because of the similarity between the two provisions, we have
held that “cases interpreting old section 6013(e) remain
instructive as to our analysis of whether a taxpayer ‘knew or had
reason to know’ of an understatement pursuant to new section
6015(b).” Butler v. Commissioner, 114 T.C. 276, 283 (2000).
(2) Application of Knowledge Requirement in Deduction
Cases
The relief-seeking spouse knows of an understatement of tax
if she knows of the transaction that gave rise to the
understatement. E.g., Purcell v. Commissioner, 826 F.2d 470,
473-474 (6th Cir. 1987), affg. 86 T.C. 228 (1986); see also Smith
v. Commissioner, 70 T.C. 651, 672 (1978). She has reason to know
of the understatement if she has reason to know of the
transaction that gave rise to the understatement. See, e.g.,
Bokum v. Commissioner, 94 T.C. 126, 146 (1990), affd. 992 F.2d
1132 (11th Cir. 1993). While courts consistently apply this
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