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1998, Mr. Garza continued to annually receive renewal income when
customers renewed life insurance policies he had sold them. For
these reasons, petitioner is not entitled to relief under section
6015(b).
Section 6015(c) affords proportionate relief to the
requesting spouse through allocation of the tax items to the
responsible party. Generally, this avenue of relief allows a
spouse to elect to be treated as if a separate return had been
filed. Rowe v. Commissioner, T.C. Memo. 2001-325. To be
eligible for relief under section 6015(c), the requesting spouse
must no longer be married to, be legally separated from, or have
lived at least 12 months apart from the individual with whom the
tax return was filed. Sec. 6015(c)(3)(A)(i). Relief under
section 6015(c) is not available, however, to a taxpayer if it is
shown that the taxpayer had actual knowledge when signing the
return of any “item” giving rise to the deficiency. Sec.
6015(c)(3)(C).
As previously discussed, petitioner was in divorce
proceedings and was legally separated from Mr. Garza in July
2004. However, as noted above, petitioner not only had reason to
know of the understatements at the time the returns were signed,
but she also had actual knowledge of the items giving rise to the
deficiencies. Because petitioner had actual knowledge of the
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