Tori Spelling isn't acknowledging her husband Dean McDermott's cheating allegations because she's afraid of potential divorce leading to a nasty custody battle, according to Hollywood Life.

The gossip site reports Spelling doesn't want her children to be affected by a divorce, and wants to protect them as much as she can.  Spelling allegedly has no plans on leaving McDermott.

"Tori is terrified of a divorce. She still wants to believe that Dean didn't cheat on her but it's becoming impossible for her to live in denial anymore - but that doesn't mean she'll leave him," an insider told Hollywood Life.

"She's so angry and hurt," the source added. "She can't stand to look at him but she's terrified of a divorce. The idea of a custody battle literally makes her sick to her stomach, and she's terrified of being single. Dean is her prince charming, or he was. Her world is shattered right now, it's so sad."

According to Radar Online, McDermott allegedly cheated on Spelling with a 28-year-old Canadian woman named Emily Goodhand during a trip Toronto.  Spelling also refuses to acknowledge the cheating rumors because she believes McDermott was unfaithful.

"It's all a calculated plan on Tori's part...she is refusing to comment on the cheating rumors publicly, even though she believes Dean did cheat on her," a source told Radar Online.  "Tori is obsessed with having a picture perfect family, and thinks it's a big part of her image. Commenting or addressing the cheating would taint that image. Things are very tense in the house right now, and Tori is making Dean's life hell."

In another Hollywood Life report, a source told the gossip site McDermott wants sex from Spelling all the time, adding he would be critical of her if she allegedly didn't perform to his liking.

"Dean would always throw it in Tori's face that their sex life wasn't as hot as it used to be," the insider said. "Well, how could it be? They now have four children, and Tori would stay up with Finn all night when he was fussy. The last thing Tori would want to do is have sex, and yet Dean would be ready to go! He even accused Tori of paying more attention to their children [than him]."

According to the Huffington Post, Spelling was spotted without her wedding ring on Dec. 29.

UPDATE: Couple spends New Year's Eve together despite cheating allegations?