- 22 -
spouse relief. Friedman v. Commissioner, 53 F.3d at 532; accord
Resser v. Commissioner, supra at 1540; McComb v. Commissioner,
T.C. Memo. 1994-577; Langberg v. Commissioner, T.C. Memo. 1994-
223. Petitioner knew about her husband's companies and also of
the land development transaction on which the deduction was
based. She participated at corporate meetings. Moreover, she
testified her husband would have been truthful with her if asked
about the deductions on the return. In light of the foregoing,
petitioner fails to meet her burden of proof to show that she did
not know, and did not have reason to know, there was a
substantial understatement of tax as a result of the erroneous
Schedule C deduction.
B. Omitted Income Items
Mrs. Meyer knew, or should have known, of the income-
producing transaction her spouse failed to report on their joint
1989 return based on: (1) Petitioner's improved family lifestyle
and (2) her involvement in the financial affairs of her family as
well as her husband's companies. See supra pp. 20-21. Where
personal living expenses to sustain petitioner's lavish lifestyle
and deposits to her accounts during 1989 greatly exceeded the
adjusted gross income of $16,247 reported on the 1989 return, a
reasonably prudent taxpayer in Mrs. Meyer's position should have
known of the substantial understatement of income. See Estate of
Jackson v. Commissioner, 72 T.C. 356, 361 (1979). Petitioner
herself deposited checks and paid expenses in amounts exceeding
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