John P. Crowley and Elizabeth R. Cockrell - Page 19

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               We disagree with petitioner's interpretation of Friedman v.            
          Commissioner, supra, as well as her characterization of herself             
          as unsophisticated with respect to financial matters.  In                   
          Friedman v. Commissioner, supra, the Court of Appeals applied the           
          knowledge standard that it adopted in Hayman v. Commissioner,               
          supra.  In Friedman v. Commissioner, supra, however, the taxpayer           
          was a "housewife and unemployed former secretary with a high                
          school education possessing only a rudimentary grasp of the                 
          simplest tax principles."  Friedman v. Commissioner, 53 F.3d at             
          530.15  The Court of Appeals held that the taxpayer in Friedman             
          v. Commissioner, supra at 531, satisfied her duty of inquiry when           
          she asked her former husband about the deductions that gave rise            
          to the understatements, and he told her that "they resulted from            
          a tax shelter and for her not to worry."  In so holding, the                
          Court of Appeals relied on the fact that the taxpayer knew that             
          the returns in question had been prepared by an accountant, who             
          was also a trusted personal friend of the family, and that the              
          tax shelter had been recommended to her former husband by a tax             
          expert, whose reputation she was familiar with through her past             


          15                                                                          
               The facts of the instant case are more analogous to those              
          of Hayman v. Commissioner, 992 F.2d 1256, 1258 (2d Cir. 1993),              
          affg. T.C. Memo. 1992-228, which involved a "highly-paid,                   
          college-educated vice-president and merchandising director                  
          employed by the well-known women's clothing chain, Ann Taylor".             
          Friedman v. Commissioner, 53 F.3d 523, 530 (2d Cir. 1995),                  
          (citing Hayman v. Commissioner, supra at 1258), affg. in part and           
          revg. in part T.C. Memo. 1993-549.                                          




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