Clarissa Ybarra - Page 9

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          items” within the meaning of section 6015(b)(1)(B), and the                 
          understatement in tax flowed from those erroneous items.                    
               Because of these erroneous items, adjusted gross income on             
          the 2004 joint return was understated, with the consequent                  
          overstatement of allowable itemized deductions.  The 10-percent             
          additional tax on early distributions from qualified retirement             
          plans imposed by section 72(t)(1) was omitted from the return,              
          and the additional child tax credit and the earned income credit            
          were overstated.6  But for the erroneous items attributable to              
          Mr. Olivas, none of these consequences would have followed.  The            
          2004 joint return as filed would have been accurate, and no                 
          understatement of tax would have resulted.  Therefore, we find              
          that petitioner has met the second requirement of section                   
               Additionally, respondent contends that petitioner has not              
          met the fourth requirement for relief under section 6015(b)(1);             
          i.e., that taking into account all the facts and circumstances,             
          it would be inequitable to hold the spouse seeking relief liable            
          for the deficiency in tax attributable to the understatement.               
          See sec. 6015(b)(1)(D).  We do not agree with this contention.              

               6Even if we view the credits that were claimed in excess of            
          the allowable amounts as erroneous items, they are attributable             
          to Mr. Olivas because it was his unreported income that made the            
          amount of claimed credit erroneous.  The misstatements of                   
          allowable credits are the consequence, rather than the cause, of            
          the omission of the distributions to Mr. Olivas from the couple’s           
          gross income.                                                               

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