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investigation was warranted. Stevens v. Commissioner, 872 F.2d
1499, 1505 (11th Cir. 1989), affg. T.C. Memo. 1988-63; Shea v.
Commissioner, 780 F.2d 561, 566 (6th Cir. 1986), affg. in part
and revg. in part on another ground T.C. Memo. 1984-310; Bokum v.
Commissioner, 94 T.C. 126, 148 (1990), affd. 992 F.2d 1132 (11th
Cir. 1993).
When deciding whether petitioner had reason to know of an
understatement, we consider several factors including
petitioner’s level of education, her involvement in the financial
transactions which gave rise to the deductions, the presence of
lavish or unusual expenditures compared to her past standard of
living, and her husband’s openness concerning these transactions.
See Stevens v. Commissioner, supra at 1505; Butler v.
Commissioner, supra at 284; Flynn v. Commissioner, 93 T.C. 355,
365-366 (1989). In making our determination, we must consider
the interplay or balance of the factors, instead of merely
counting the factors in a requesting spouse’s favor. Guth v.
Commissioner, supra at 444.
At the time petitioner signed the returns, petitioner had
completed 2 years of college, where she studied art. She did not
have any education or work experience in tax, financial, or
accounting matters. We find nothing in the record regarding her
education and experiences that would or should have alerted her
to the pitfalls of this situation.
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