Dorene Bulger - Page 18

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          spouse.13  Sec. 6015(c)(3)(C).  In cases involving erroneous                
          deductions, an individual is deemed to have actual knowledge of             
          an item giving rise to a deficiency if she has actual knowledge             
          of the factual basis for the denial of the deductions.  King v.             
          Commissioner, 116 T.C. 198, 204 (2001).  Although the requesting            
          spouse bears the burden of proving the portion of the deficiency            
          that is properly allocable to her, see sec. 6015(c)(2), the                 
          Commissioner bears the burden of proving that the requesting                
          spouse had actual knowledge of any items giving rise to the                 
          deficiency,  sec. 6015(c)(3)(C).                                            
               2.   Reasonableness of Respondent’s Position                           
               Respondent contends that the position taken in his answer to           
          petitioner’s petition was substantially justified because the               
          information available to the Appeals officer at the time “showed            
          that petitioner had knowledge of and had been involved with the             
          Hoyt organization to some degree”, and petitioner had not                   
          verified Mr. Bulger’s death by providing a death certificate.               
          Respondent further contends that his position was substantially             
          justified because, without further factual development, it was              
          impossible to determine whether petitioner had actual knowledge,            
          to confirm that no disqualified assets had been transferred to              


               13An election under sec. 6015(c) is also invalid if the                
          Secretary demonstrates that assets were transferred between the             
          individuals filing the joint return as part of a fraudulent                 
          scheme.  Sec. 6015(c)(3)(A)(ii).                                            





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