Harvey I. Epstein and Arlene B. Epstein - Page 13

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          any meaningful answers to any questions she from time to time               
          asked.                                                                      
               As stated in Friedman, the fact that the innocent spouse-              
          taxpayer knows of the existence of a tax shelter, and the                   
          deductions it hopefully gives rise to, does not itself establish            
          that she cannot meet the lack of knowledge requirement of section           
          6013(e)(1)(C).  Friedman v. Commissioner, supra at 530.  In the             
          case before us, petitioner testified that she knew that Harvey              
          was in the business of selling tax shelters, but was unaware that           
          he was investing in them himself.  While this profession of lack            
          of knowledge is of course self-serving, petitioner's additional             
          testimony rings true, namely, that she was led to believe, at               
          least during the relevant years, that tax shelters were on the up           
          and up and were, like IRAs, a legitimate way to save taxes.  In             
          the era that encompassed the years 1976-1978, individuals far               
          more financially sophisticated than petitioner let themselves               
          believe that the tooth fairy in the guise of a tax shelter would            
          bring them substantial wealth, at little or no cost to                      
          themselves, which would be entirely paid for out of the National            
          fisc as tax savings.  We, therefore, hold that petitioner had no            
          reason to know that the returns for the relevant years contained            
          substantial understatements of tax.                                         
               To meet the fourth requirement imposed by section 6013(e) to           
          validate an innocent spouse claim, the taxpayer must establish              





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