- 42 -
dealings with oil and the extent and magnitude thereof. Among
other things, we find that Mrs. Fields knew that petitioner
worked as a consultant for Ashland, that he was attempting to
secure crude oil for Ashland, that he traveled abroad extensively
using his various contacts to locate a source of oil, that he
traveled on business to Bermuda and Cameroon, and that his
business pursuits involved Ashland, oil, and a Government
official from Cameroon.
Even if we were to conclude (which we do not) that she did
not know of petitioner's activities at the relevant times, we
believe that she certainly should have known of the
understatement of income on each of the returns when she signed
them. Mrs. Fields is well educated and intelligent. She was
actively involved in the family's business and financial affairs.
She knew of the magnitude of petitioners' spending during the
relevant years, including extraordinary expenditures (e.g.,
purchase of a boat, purchase and renovation of homes), and she
knew that the money to pay for these expenses did not come from
petitioners' checking account. A prudent person in Mrs. Fields'
position would have known that the returns were erroneous or that
further inquiry was warranted. Perfect knowledge of the family's
financial affairs is not required to satisfy the reason to know
standard. Shea v. Commissioner, 780 F.2d 561, 567 (6th Cir.
1986), affg. in part and revg. in part T.C. Memo. 1984-310.
Page: Previous 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 NextLast modified: May 25, 2011