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relief. Knowledge need not be actual or complete. The more an
alleged innocent spouse knew about a transaction, the more likely
that he or she knew or had reason to know that the return
contained a substantial understatement. Id. A spouse has "reason
to know" of an understatement if a reasonably prudent person,
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 on the return was erroneous, or that further
investigation was warranted. Id.; Sanders v. United States,
509 F.2d 162 (5th Cir. 1975); Bokum v. Commissioner, 94 T.C. 126,
148 (1990), affd. 992 F.2d 1132 (11th Cir. 1993); Terzian v.
Commissioner, 72 T.C. 1164, 1170 (1979). Critical factors to
consider in passing on this objective test include: (1) The
level of education of the alleged innocent spouse, (2) his or her
involvement in the family's business and financial affairs,
(3) the presence of expenditures that appear lavish or unusual
when compared to the family's past level of income, standard of
living, and spending patterns, and (4) the "culpable" spouse's
refusal to be forthright about the couple's income. Bliss v.
Commissioner, supra at 378; Wimpie v. Commissioner, T.C. Memo.
1994-41.
Turning to the facts at hand, we find that Mrs. Fields knew
of the underlying transactions that generated the omitted income
when she signed the subject returns. The record demonstrates
that Mrs. Fields knew about petitioner's business venture and
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