Russell Whiting Packer - Page 7

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              Where a spouse seeking relief has actual knowledge of the               
         underlying transaction that produced the omitted income, innocent            
         spouse relief is denied.  Cheshire v. Commissioner, 115 T.C. 183,            
         192-193 (2000), affd. 282 F.3d 326 (5th Cir. 2002).  The                     
         requesting spouse has “reason to know” of the understatement of              
         tax if he knew every fact necessary to determine the legal                   
         consequences of the income or if such facts are reasonably within            
         his reach; ignorance of the attendant tax consequences is not a              
         defense.  Mitchell v. Commissioner, 292 F.3d 800, 802-804 (D.C.              
         Cir. 2002), affg. T.C. Memo. 2000-332; Price v. Commissioner, 887            
         F.2d 959, 964 (9th Cir. 1989); McCoy v. Commissioner, 57 T.C.                
         732, 734-735 (1972).                                                         
              The Court finds that petitioner has failed to satisfy the               
         requirement of section 6015(b)(1)(C).  Petitioner had actual                 
         knowledge of the distribution at the time that he signed the                 
         return, which gave him reason to know of the understatement of               
         tax on the 1999 return.  Therefore, petitioner is not entitled to            
         relief under section 6015(b).                                                
         Relief Under Section 6015(c)                                                 
              Section 6015(c) allows proportionate tax relief (if a timely            
         election is made) through allocation of the deficiency between               
         individuals who filed a joint return and are no longer married,              
         are legally separated, or have been living apart for a 12-month              

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