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she had signed the tax return, then "she would have seen the
$1,600,000 loss from State Coal claimed on the face of the return
and noticed that the return reported zero tax liability."
Petitioners maintain that respondent vastly overstates
Nancy's financial role in the Silverman marriage, and that
Nancy's testimony about her lack of actual knowledge is reliable
and uncontradicted. Petitioners also maintain that Nancy did not
have any knowledge which should have led her to realize that
there might be a tax problem and that she should ask Sheldon
about it. Finally, petitioners maintain that respondent's focus
on what Nancy would have seen if she had signed the 1981 tax
return is irrelevant because in fact Nancy did not see and did
not sign the 1981 tax return.
We agree with petitioners that Nancy did not know, and had
no reason to know, of the understatement in tax.
In Bokum v. Commissioner, 94 T.C. at 148, we set forth our
position as follows:
The standard to be applied in determining whether a
putative innocent spouse has "reason to know," under section
6013(e)(1)(C) is whether a "reasonably prudent taxpayer
under the circumstances of the spouse * * * could be
expected to know that the tax liability stated was erroneous
or that further investigation was warranted." Stevens v.
Commissioner, 872 F.2d at 1505 (fn. ref. omitted); Shea v.
Commissioner, 780 F.2d 561, 566 (6th Cir. 1986), affg. on
this issue and revg. on another issue * * * [T.C. Memo.
1984-310]. This standard applies to deduction, etc.,
matters, as well as income matters. 872 F.2d at 1505 n.8.
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