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Respondent’s position that petitioner had actual knowledge
of the overstated interest was based on the facts that the
mortgages related to properties for which petitioner was aware
she was listed as a joint owner, petitioner knew that loans were
acquired on these properties because she acknowledged signing the
loan and deed documents for the properties, and petitioner wrote
the checks for the mortgage payments in 1987 and 1988. On the
basis of these facts and the relevant legal precedent, we find
that respondent had a reasonable basis for arguing that
petitioner had actual knowledge of the overstated interest and,
therefore, was not entitled to relief under section 6015(c) for
the portion allocable to Mr. Rowe.
d. Farming Activity Losses
For the years 1987 through 1990, petitioner and Mr. Rowe
reported substantial losses related to a farming activity.
Respondent disallowed these losses on the ground that the
activity was not engaged in for profit within the meaning of
section 183. Respondent’s position with respect to petitioner’s
claim for relief under section 6015(c) was that the activity was
allocable evenly between petitioner and Mr. Rowe, and relief was
not available because petitioner had actual knowledge of the
activity. Respondent’s position was based on the facts that
petitioner and Mr. Rowe were listed on the tax returns for 1987,
1988, and 1989 as the proprietors of the farming activity,
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