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knowledge for purposes of the innocent spouse provisions.
Petitioner relies too heavily on these factors which, in any
event, are derived from her self-serving testimony. The level of
education and level of participation in business and family
affairs do not themselves confer innocent spouse status; rather,
they are relevant to whether, at the time of signing the return,
a reasonably prudent taxpayer in the spouse's circumstance could
be expected to know that the tax liability as stated was
erroneous or that further investigation was warranted. Sanders
v. United States, 509 F.2d 162, 166-167 n.5 (5th Cir. 1975).
The fact petitioner possessed only a high school diploma
does not automatically disqualify her from having "reason to
know" of the substantial understatement. See Langberg v.
Commissioner, T.C. Memo. 1994-223. Moreover, contrary to
petitioner's argument, the duty of inquiry is not obviated by her
lack of familiarity with the Federal tax laws or her reliance on
her husband's familiarity with their finances and Federal tax
laws. Hayman v. Commissioner, 992 F.2d at 1262; Park v.
Commissioner, supra. A reasonably prudent taxpayer in Mrs.
Meyer's position would have questioned the legitimacy of the
deduction. Petitioner handled payment of all the household
expenses and presumably knew the amount of income it took to run
the household. See Resser v. Commissioner, supra at 1538; Price
v. Commissioner, 887 F.2d at 965; Prince v. Commissioner, T.C.
Memo. 1995-368; Langberg v. Commissioner, T.C. Memo. 1994-223.
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