- 16 -
Park v. Commissioner, supra at 1293-1294; Sanders v. United
States, supra at 169; Bokum v. Commissioner, supra at 146.
Consequently, a spouse who knows or has reason to know of such a
transaction does not qualify for relief as an innocent spouse.
Park v. Commissioner, supra; Sanders v. United States, supra. A
spouse has “reason to know” of an understatement if
a reasonably prudent taxpayer under the circumstances
of the alleged innocent spouse at the time of signing
the return could be expected to know that the tax
liability stated was erroneous or that further
investigation was warranted. * * * [Park v.
Commissioner, supra at 1293 (citing Sanders v. United
States, supra at 166-167 and n.5.)]
In deciding the issue, factors we consider include: (1) The
level of education of the spouse seeking relief; (2) the spouse’s
involvement in the family’s business and financial affairs; (3)
unusual or lavish expenditures made by the family; and (4) the
“culpable” spouse’s refusal to be forthright about the couple’s
income. Park v. Commissioner, 25 F.3d at 1293; Sanders v. United
States, 509 F.2d at 167-170. In reaching our decision, we
consider the interplay among the factors, and different factors
will predominate in different cases. Bliss v. Commissioner, 59
F.3d 374, 378 (2d Cir. 1995), affg. T.C. Memo. 1993-390.
Turning to the facts of the instant case, we find that, even
if, at the relevant time, petitioner did not actually know that
Ms. Dawson was embezzling funds from her employers, i.e., the
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