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allocable to petitioner bears to the net amount of all erroneous
items taken into account in computing the deficiency. The
proportionate allocation can be algebraically expressed as
follows:
net amount of erroneous items
X = deficiency x allocable to the spouse
net amount of all erroneous items
where X is the portion of the deficiency allocable to petitioner.
See sec. 1.6015-3(d)(4)(i)(A), Income Tax Regs.
Under the proportionate allocation method, $2,744.69 is the
portion of the $8,225 deficiency allocable to petitioner,
computed as follows:
$2,744.69 = $8,225 x $14,204
$42,565
a. Respondent’s Computation
Respondent computed petitioner’s share of the deficiency to
be $2,820. Respondent computed petitioner’s share of the
deficiency by applying the proportionate allocation method
required by section 6015(d) to the Form 4797 loss and the theft
loss ($2,820 = $8,225 x $14,204 � $41,422). Respondent’s
computation is flawed in that it does not take into account the
$1,143 disallowed deduction for medical/dental expenses.
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