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seeking innocent spouse relief should generally bear the burden
of proving entitlement thereto. However, as discussed in greater
detail infra, the burden of proof issue does not influence the
outcome of this case because our decision is based on the
preponderance of the evidence. See Blodgett v. Commissioner, 394
F.3d 1030, 1035 (8th Cir. 2005), affg. T.C. Memo. 2003-212.
C. Ms. McClelland’s Claim for Innocent Spouse Relief
As previously stated, it is agreed that the deficiencies in
this case arose from an incorrect interest paid deduction taken
by Red Wing on its Federal income tax return for its fiscal tax
year ended October 31, 1997. Under section 1366(a), a
shareholder’s pro rata share of an S corporation’s tax attributes
is included in the shareholder’s tax year in which the taxable
year of the S corporation ends. In this case, petitioners’ 1997
joint return reflected the improper interest paid deduction
because Red Wing claimed the deduction for its fiscal tax year
ended October 31, 1997.
Although petitioners petitioned this Court with respect to
respondent’s determinations for their 1997 and 1998 tax years,
the parties have stipulated that petitioners did not have a
deficiency in tax for 1998.
1. Section 6015(b)
A relief-seeking spouse qualifies for innocent spouse relief
under section 6015(b)(1) if:
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