Patricia S. Makalintal - Page 20

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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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