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b. Actual Knowledge Exception Does Not Apply to
Petitioner
As previously indicated, if the Commissioner demonstrates
that an individual making the election under section 6015(c) had
“actual knowledge”, at the time such individual signed the
return, of any item giving rise to a deficiency (or portion
thereof) which is not allocable to such individual under section
6015(d), the election under section 6015(c) will not apply to
such deficiency (or portion). Sec. 6015(c)(3)(C). The
Commissioner must prove actual knowledge by a preponderance of
the evidence. Culver v. Commissioner, 116 T.C. 189, 196 (2001).
Actual knowledge in the case of disallowed deductions consists of
“actual knowledge of the factual circumstances which made the
item unallowable as a deduction.” King v. Commissioner, 116 T.C.
198, 204 (2001). Actual knowledge of the tax laws or legal
consequences of the operative facts are not required. Id.;
Cheshire v. Commissioner, 115 T.C. 183, 196-197 (2000), affd. 282
F.3d 326 (5th Cir. 2002).
Respondent concedes that he has not proven actual knowledge
with respect to the Far West Drilling adjustments that are
allocable to Mr. Hopkins. Respondent makes no argument on brief
with respect to petitioner’s actual knowledge of the NOL
carryforward deductions for 1982 and 1984 attributable to the
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