- 32 - persuade us that it is more likely than not that Nancy did not know of the State Coal investment by the time the 1981 tax return was signed; petitioners have clearly carried this burden of proof. We next consider whether Nancy should have known of the State Coal investment. Courts have considered several factors in deciding whether a taxpayer had reason to know of a substantial understatement of tax attributable to the grossly erroneous item (in the instant case, the State Coal deduction), including (1) the putative innocent spouse's level of education, (2) his or her involvement in the family's business and financial affairs, (3) the putative guilty spouse's evasiveness and deceit about the family's finances, and (4) the presence of lavish or unusual expenditures or any large unexplained increase in the family's standard of living. Flynn v. Commissioner, 93 T.C. 355, 365-366 (1989). Nancy received a B.A. degree in English literature from the University of Cincinnati in 1964. Nancy was in charge of the household. She paid for household items out of a joint checking account; the funds deposited into the account came from Sheldon. Nancy was generally aware of Sheldon's business and investment activities, and was aware of (1) Sheldon's sale of Dawn Joy interest before it took place, (2) Sheldon's Royal Green Fashion investment when it took place, and (3) Sheldon's investments inPage: Previous 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 Next
Last modified: May 25, 2011