Phyllis E. Campbell - Page 14

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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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