Curtis Earl Moore - Page 9

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          petitioner was not involved in Wee Ones Child Care, other than as           
          a handyperson, providing maintenance assistance to Ms. Moore.               
          His assistance to his former spouse in the initial funding and              
          his purchase of some supplies does not create a joint venture, as           
          suggested by respondent.  Thus, we conclude that petitioner                 
          satisfies section 6015(b)(1)(B).                                            
               The second of the three remaining elements of section                  
          6015(b)(1) requires that petitioner, in signing the return, did             
          not know, and had no reason to know, that there was an                      
          understatement.  See Grossman v. Commissioner, 182 F.3d 275, 279-           
          280 (4th Cir. 1999), affg. T.C. Memo. 1996-452.  A requesting               
          spouse has knowledge or reason to know of an understatement if he           
          or she actually knew of the understatement, or if a reasonably              
          prudent taxpayer in his or her position, at the time he or she              
          signed the return, could be expected to know that the return                
          contained an understatement or that further investigation was               
          warranted.3  Butler v. Commissioner, supra at 283.  In deciding             
          whether a spouse has reason to know of an understatement, we                
          undertake a subjective inquiry, and we recognize several factors            


               3  Secs. 1.6015-2 and 1.6015-3, Income Tax Regs., do not               
          apply to the present case because petitioner’s request for relief           
          was filed before the regulation’s effective date of July 18,                
          2002.  See sec. 1.6015-9, Income Tax Regs.  Nevertheless,                   
          application of those regulations to the present case would yield            
          the same result, that is, petitioner did not know or have reason            
          to know of the understatement of tax attributable to the Schedule           
          C deductions of Wee Ones Child Care.                                        





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