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petitioner attended some horse shows, and petitioner testified
that the horse activity was a fun thing for Mr. Rowe to do with
his son on the weekends.
We found that the farming activity was allocable to Mr. Rowe
because petitioner had little or no involvement in the activity,
and she did not know that her name was listed on the tax returns
as a proprietor of the activity. With respect to whether
petitioner had actual knowledge of this item, we relied on our
recent decision in King v. Commissioner, 116 T.C. 198 (2001), for
the proposition that respondent was required to show that
petitioner knew or believed that Mr. Rowe was not engaged in the
farming activity for profit. Because respondent failed to
establish that petitioner knew or believed that Mr. Rowe was not
engaged in the farming activity for profit, we held that
petitioner was entitled to relief for the farming activity
losses.
As we noted in our previous opinion, the legislative history
of section 6015(c) indicates that the allocation of business
deductions is expected to follow the ownership of the business,
and personal deduction items are expected to be allocated equally
between spouses, unless the evidence shows that a different
allocation is appropriate. S. Rept. 105-174, at 56-57 (1998),
1998-3 C.B. 537, 592-593. In the instant case, petitioner was
listed on the joint tax returns as a proprietor of the farming
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