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petitioner. Indeed, all of the embezzled funds were deposited in
and disbursed from joint checking accounts to which petitioner
had access and with respect to which statements were available to
him.
Under the circumstances of the instant case, a reasonably
prudent person would have seriously questioned the gross income
reported in the joint return petitioner and Ms. Dawson filed for
1988, and petitioner, therefore, had a duty of inquiry with
respect to the correctness of the reported income, a duty that he
failed to discharge. Park v. Commissioner, 25 F.3d at 1293;
Sanders v. United States, 509 F.2d at 167. We accordingly find,
based on the entire record, that petitioner knew or had reason to
know of the substantial understatement of tax on the 1988 return
resulting from the omission of the income embezzled by Ms. Dawson
during such year.
The next matter we consider is whether it would be
inequitable to hold petitioner liable for the deficiency
attributable to the omission of the funds embezzled by Ms. Dawson
from the 1988 return. Sec. 6013(e)(1)(D). In deciding the
issue, we take into account all of the facts and circumstances.
Id.; sec. 1.6013-5(b), Income Tax Regs. A factor to be
considered is whether the person seeking relief significantly
benefited, directly or indirectly, from the omitted income.9
9
Although sec. 6013(e)(1)(D), since its amendment in 1984, no
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