- 21 -                                         
               On July 18, 2002, the Commissioner published final                     
          regulations under section 6015.20  Section 1.6015-3(d)(2), Income           
          Tax Regs., of the final regulations provides in part:                       
                    (2)  Allocation of erroneous items.  For purposes                 
               of allocating a deficiency under this section,                         
               erroneous items are generally allocated to the spouses                 
               as if separate returns were filed, subject to the                      
               following four exceptions:                                             
                         (i)  Benefit on the return.--An erroneous                    
                    item that would otherwise be allocated to the                     
                    nonrequesting spouse is allocated to the                          
                    requesting spouse to the extent that the                          
                    requesting spouse received a tax benefit on the                   
                    joint return.                                                     
          While the above-quoted portion of the regulations does not                  
          specifically address the situation at issue, where an erroneous             
          item of deduction of the electing individual offsets income of              
          the nonelecting individual, it does not purport to preclude                 
          application of section 6015(d)(3)(B) to that situation.                     
               Indeed, the final regulations provide an example which                 
          supports our application of the alternative allocation method in            
          section 6015(d)(3)(B).  In section 1.6015-3(d)(5), Example (5),             
          Income Tax Regs., both individuals who filed a joint return elect           
          relief under section 6015(c).  The erroneous deduction is                   
          initially H’s item; however, in the example, only a portion of              
               20These regulations are applicable for all elections or                
          requests for relief filed on or after July 18, 2002.  Washington            
          v. Commissioner, 120 T.C. 137, 154 n.9 (2003); sec. 1.6015-9,               
          Income Tax Regs.  Petitioner’s election was filed on May 24,                
          1999, before the effective date of the regulations.                         
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