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professional relationship with his accountant, Mr. Defalco, and
that he prepared the couple's tax returns as well as the returns
for the entities that Mr. Acquaviva controlled. Petitioner had
no reason to question Mr. Defalco's ability. Moreover, when the
1985 and 1986 returns were filed, there was no substantial
understatement of tax attributable to the involuntary
conversions. By operation of respondent's regulations, the
Acquavivas were treated as having elected the provisions of
section 1033 with the filing of the 1985 and 1986 returns. See
sec. 1.1033(a)-(2)(c)(2), Income Tax Regs.
Based on our review of the record as a whole, we hold that
petitioner did not know, and had no reason to know, of any
substantial understatement of income on the couple's Federal
income tax returns for the taxable years 1985, 1986, 1987.
2. Equity of Holding Petitioner Liable
The final requirement for innocent spouse relief is that,
given all of the facts and circumstances, it would be inequitable
to hold petitioner liable for the deficiency attributable to the
substantial understatement. Sec. 6013(e)(1)(D). Although
section 6013(e)(1)(D), as amended, no longer requires us to
determine whether petitioner significantly benefited as a result
of the omitted income, this factor is still considered in
determining whether it is inequitable to hold petitioner liable.
Purificato v. Commissioner, 9 F.3d at 296; sec. 1.6013-5(b),
Income Tax Regs. Any significant benefit received by petitioner
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