A: Well, because I wouldn't have understood it in the
first place.
Q: So you didn't have a problem with that arrangement,
that he was not hiding things from you, he was just --
A: No. I trusted him and he trusted me.
Petitioner chose to rely on Mr. Woodward regarding financial
matters.
(v) Large deductions or credits that substantially
eliminate taxable income
This factor is particularly significant in this case. Large
deductions or credits, particularly those that completely or
substantially eliminate taxable income, may give a taxpayer
reason to know that an understatement exists or a duty to inquire
as to the legitimacy of the deduction or credit. Pettinato v.
Commissioner, supra. By failing to examine the 1983 return and
the application for refund, petitioner chose to ignore facts that
would have given her reason to know of the substantial
understatements. Even the most cursory perusal of the
application for refund would have revealed claims for refunds for
all Federal income taxes paid in 1980 and 1981. A reasonably
prudent person in petitioner's position would have certainly
questioned the legitimacy of these refunds. Petitioner, by
declining to do so, failed in her duty of inquiry.
By failing her duty of inquiry, petitioner is charged with
constructive knowledge of the substantial understatements
appearing in the income tax returns. See Park v. Commissioner,
25 F.3d 1289, 1299 (5th Cir. 1994) ("by signing the return * * *
[the putative innocent spouse] undertook responsibility for it
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