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Mr. Owen had invested jointly in the Hoyt partnership. In an
“EXPLANATION OF ITEMS” attached to the Appeals Transmittal and
Case Memo that was prepared with respect to petitioner’s section
6015 request, the Appeals Office took the position that “Joint
investments in the tax shelter partnerships are considered actual
knowledge and an erroneous item attributable to both spouses” and
determined that in the present case, “The taxpayers were into the
tax shelter jointly. The erroneous item is attributable to
both.” In addition, respondent admitted in the notice of
determination and in his response to petitioner’s motion that the
facts available to him suggested that the Owens invested jointly
in DGE. Nevertheless, respondent failed to consider how the
deficiencies must be allocated between petitioner and her spouse
under section 6015(c) and (d) if respondent’s position regarding
their joint investment was correct. If respondent had made the
allocation that flowed naturally from his position that the Owens
had invested jointly in DGE, he would necessarily have allocated
the Hoyt partnership items between petitioner and Mr. Owen in
accordance with their respective ownership interests. Respondent
also likely would have realized that he had to prove petitioner
had actual knowledge of the reasons for disallowing Mr. Owen’s
allocable share of the Hoyt partnership items in order for
respondent to conclude that petitioner was not entitled to any
section 6015(c) relief. Respondent’s failure to make an
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