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therefore is not entitled to relief as an innocent spouse. We
agree.
The Court of Appeals for the Second Circuit, the court to
which an appeal in the instant case would lie, interprets
subsection 6013(e)(1)(C) as requiring a taxpayer to establish
that "'she [or he] did not know and did not have reason to know
that the deduction would give rise to a substantial
understatement.'" Hayman v. Commissioner, 992 F.2d 1256, 1261
(2d Cir. 1993), (quoting Price v. Commissioner, 887 F.2d 959, 963
(9th Cir. 1989), revg. an Oral Opinion of this Court), affg. T.C.
Memo. 1992-228.
Turning to the facts of the instant case, respondent
contends that petitioner knew that the deductions in issue would
give rise to substantial understatements when she signed the
returns for the taxable years in issue. Respondent relies
primarily on the testimony of Robert Kraft to support such
contention. During the trial of the instant case, Mr. Kraft
testified that he had received a law degree from Georgetown
University Law Center. At a subsequent hearing, Mr. Kraft
admitted that he has never received a law degree. In light of
Mr. Kraft's admission, we regard his testimony as inherently
untrustworthy and, therefore, do not accept his testimony.
Respondent also argues that, because petitioner was a stockbroker
who had passed the "series seven" stockbroker examination prior
to the time she signed the returns in issue, she must have been
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