24
(D) taking into account all the facts and
circumstances, it is inequitable to hold the other spouse
liable for the deficiency in tax for such taxable year
attributable to such substantial understatement * * *
The burden is on petitioner wife to prove that she is entitled to
innocent spouse relief. Bokum v. Commissioner, 94 T.C. 126, 138
(1990), affd. 992 F.2d 1132 (11th Cir. 1993). The parties have
stipulated that for the 1987 tax year a joint return was filed,
and there was a substantial understatement of tax. We are left
to decide if there was a grossly erroneous item attributable to
petitioner husband, and if petitioner wife did not know, and had
no reason to know, of such substantial understatement, and if it
would be inequitable to hold petitioner wife liable. Failure to
prove any one of the four elements set forth in section
6013(e)(1) prevents a taxpayer from qualifying for relief under
the innocent spouse rule. Park v. Commissioner, 25 F.3d 1289,
1292 (5th Cir. 1994), affg. T.C. Memo. 1993-252.
The requirement of section 6013(e)(1)(C) is that petitioner
wife establish that she did not know, or have reason to know, of
such understatement. Petitioner wife is a practicing attorney.
At trial she testified that she did not know the specific details
of DRPC, but that she nonetheless lent petitioner husband money
and often called DRPC and made general inquiries into how things
were going. Petitioner wife claimed that she did not think that
there was any problem with the losses reported from DRPC because
it was a new enterprise, and she expected a loss considering the
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