Elsie R. Garza - Page 8

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          to grant equitable relief for taxpayers who otherwise do not                
          qualify for relief under either subsection (b) or (c).                      
               A prerequisite for relief under section 6015(b) or (c) is              
          the existence of an “understatement of tax” or a tax deficiency.            
          Sec. 6015(b)(1)(B), (c)(1); Block v. Commissioner, 120 T.C. 62,             
          65-66 (2003).  Except as otherwise provided in section 6015, the            
          requesting spouse bears the burden of proving that each                     
          requirement of section 6015(b)(1) has been satisfied.  Rule                 
          142(a); Alt v. Commissioner, 119 T.C. 306, 311 (2002), affd. 101            
          Fed. Appx. 34 (6th Cir. 2004).                                              
               Under section 6015(b), the Court may grant a taxpayer full             
          or apportioned relief from joint and several liability for an               
          understatement of tax on a joint return if, among other                     
          requirements,5 the taxpayer establishes that she “did not know,             
          and had no reason to know” that the other spouse understated that           
          spouse’s tax liability on the return.  Sec. 6015(b)(1)(C), (2).             
               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             

               5Neither respondent nor petitioner disputes that, in this              
          case, the requirements of subpars. (A), (B), and (E) of sec.                
          6015(b)(1) have been satisfied.  The dispute is solely as to                
          whether petitioner meets the requirements of subpars. (C) and (D)           
          of sec. 6015(b)(1).                                                         

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