- 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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