Carl Dimichele and Eileen Dimichele - Page 19

             education and no formal training in finance or accounting.               
             She also argues that, during the years in issue, she had                 
             limited involvement in the financial affairs of the family               
             and that she and her husband made "no unusually lavish                   
             expenditures * * * when compared to their past levels                    
             of income, standard of living and spending pattern."                     
             Petitioner emphasizes that she was not involved in any way               
             in her husband's illegal activities, and she notes that the              
             Government's investigation of her husband did not implicate              
             her in any illegal activity.  Finally, she argues that the               
             testimony of Mr. Michael Madgin, a Government informant, is              
             incredible and should be disregarded.                                    
                  We find that petitioner did not meet her burden of                  
             proving that she did not know, and had no reason to know,                
             that there was a substantial understatement of tax on her                
             joint returns for 1985 and 1986.  There is ample evidence                
             from which we infer that petitioner knew of Mr. DiMichele's              
             illegal drug business and, hence, knew or should have                    
             known of the substantial understatements of tax in 1985 and              
             1986, which were attributable to the unreported income from              
             that business.  The record shows that Mr. DiMichele                      

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