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revg. T.C. Memo. 1991-361; Guth v. Commissioner, supra at 443;
Price v. Commissioner, supra at 961-962.
Respondent concedes herein that Mr. Makalintal and
petitioner filed joint Federal income tax returns for 1986, 1987,
and 1988 and that any substantial understatements of tax
reflected thereon (relating to Mr. Makalintal’s sale of his ICPI
stock and to the deposits into Mr. Makalintal and petitioner’s
bank accounts) are attributable to grossly erroneous items of
Mr. Makalintal. Respondent, however, argues that petitioner knew
or had reason to know of substantial understatements of tax
relating to the above items and that it would not be inequitable
to hold petitioner liable therefor.
Generally, the question of whether a spouse knew or had
reason to know of a substantial understatement is governed by
whether "a reasonably prudent taxpayer under the circumstances of
the spouse at the time of signing the return could be expected to
know that the tax liability stated was erroneous or that further
investigation was warranted." Stevens v. Commissioner, 872 F.2d
1499, 1505 (11th Cir. 1989), affg. T.C. Memo. 1988-63; see Griner
v. Commissioner, 951 F.2d 360 (9th Cir. 1991), affg. without
published opinion T.C. Memo. 1990-301; Bokum v. Commissioner, 94
T.C. 126, 148 (1990), affd. 992 F.2d 1132 (11th Cir. 1993). The
standard is based on a reasonably prudent taxpayer in the
particular circumstances of the taxpayer involved in the case.
Pietromonaco v. Commissioner, supra at 1345.
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