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workers provided, and (2) disallowed business expense deductions
for failure to provide substantiation.
The Commissioner must show that the requesting spouse had an
“actual and clear awareness” of omitted income. Cheshire v.
Commissioner, supra at 337 n.26; Cook v. Commissioner, T.C. Memo.
2005-22; Rowe v. Commissioner, T.C. Memo. 2001-325. Knowledge of
the item includes knowledge of the receipt of the income. Sec.
1.6015-3(c)(2)(i)(A), Income Tax Regs.
At trial, petitioner admitted that she cashed or deposited
the checks from the farmers representing the omitted income on
her return. Therefore, petitioner had actual knowledge of the
omitted income.
In the case of an erroneous deduction, knowledge of the item
means knowledge of the facts that made the item not allowable as
a deduction. Sec. 1.6015-3(c)(2)(i)(B), Income Tax Regs.; see
Rowe v. Commissioner, supra (citing King v. Commissioner, 116
T.C. 198, 204 (2001)). At trial, petitioner testified that she
handled the receipts, made deposits, wrote checks, reviewed bank
statements, and kept track of income and expenses for Contractor.
The business account was not held jointly but was held solely in
petitioner’s name, doing business as Contractor. Petitioner was
also responsible for dealing with the bookkeeping company that
kept track of Contractor’s payroll. Mr. Pacheco was not involved
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