- 19 -
Commissioner, 992 F.2d 1256, 1262 (2d Cir. 1993), affg. T.C.
Memo. 1992-228. As noted below, Gerald assured petitioner that
everything was in order, and she relied on Gelda's reputation as
return preparer.
We look at the following four factors to determine whether a
reasonably prudent taxpayer in petitioner's position should have
known that the return contained a substantial understatement:
(1) Petitioner's level of education; (2) petitioner's knowledge
and experience in the family's business and financial affairs;
(3) whether the family's standard of living during the years in
issue was lavish compared to past levels of income and
expenditures; and (4) the conduct of the culpable spouse in
concealing the true state of the family's finances from
petitioner. Friedman v. Commissioner, supra at 531-532.
Petitioner graduated from high school and completed two
semesters of college. She had no training or experience in
business matters. Petitioner has worked in the home since 1966.
Petitioner's knowledge of the family's financial affairs and
Gerald's business affairs was minimal. Petitioner paid household
expenses from a joint checking account, and that was her only
involvement in the family's financial affairs. Petitioner had no
voice in the Jacobys' investments, and she was not aware that
Gerald had invested in tax shelters. She had no role in Gerald's
businesses, and he would not discuss his business activities with
her.
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