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(D) taking into account all the facts and
circumstances, it is inequitable to hold the other
individual liable for the deficiency in tax for such
taxable year attributable to such understatement; and
(E) the other individual elects * * * the benefits
of this subsection not later than the date which is 2
years after the date the Secretary has begun collection
activities with respect to the individual making the
election * * *.
Because these requirements are stated in the conjunctive, a
requesting spouse must satisfy each requirement to qualify for
relief from joint and several liability under section 6015(b).
Alt v. Commissioner, supra at 313. Respondent concedes that
petitioner meets the three requirements of subparagraphs (A),
(B), and (E). Thus, we shall address only the application of
section 6015(b)(1)(C) and (D).
1. Section 6015(b)(1)(C): Know or Reason To Know
A spouse seeking relief under section 6015(b) must not have
known or had reason to know at the time of signing a joint return
that there was an understatement of tax on the return. Sec.
6015(b)(1). The general rule in an omission of income case is
that the relief-seeking spouse knew or had reason to know of an
understatement of tax if she knew of the transaction that gave
rise to the understatement. Erdahl v. Commissioner, 930 F.2d
585, 589 (8th Cir. 1991), revg. T.C. Memo. 1990-101; Jonson v.
Commissioner, supra at 115. However, in deduction cases, the
Court of Appeals for the Eighth Circuit has adopted a different
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