- 36 -
In light of these facts and circumstances, we conclude, and
we have found, that Nancy did not know and did not have reason to
know of the substantial understatement of tax for 1981.
We hold for petitioners on this issue.
C. The Equities
Respondent contends that it is not inequitable to hold Nancy
liable for the 1981 deficiency, because of the financial benefits
Nancy received from Sheldon. In particular, respondent directs
our attention to the following:
(1) Nancy came to the marriage with assets worth less
than $50,000 and left it after Sheldon's death with assets
worth more than $2.5 million, with "virtually all" of the
increase having been "accumulated from Mr. Silverman's
earnings."
(2) Less than 3 months after receiving and depositing
the $81,054.77 tax refund check for 1981, Sheldon paid a
$12,840 life insurance premium from that account on his life
insurance policy 8013005. When Sheldon died, Nancy received
a death benefit of $489,163 from that policy. See supra
table 8.
(3) The claimed $1,600,000 loss deduction freed up
$54,372.61 of Sheldon's 1981 income tax withholding to be
applied to Sheldon's and Nancy's 1980 income tax liability,
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