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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
6015(b)(1).
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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