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couple's finances. See Friedman v. Commissioner, 53 F.3d 523,
531 (2d Cir. 1995), affg. in part and revg. in part T.C. Memo.
1993-549; Hayman v. Commissioner, supra at 1261 (citing Erdahl v.
Commissioner, 930 F.2d 585 (8th Cir. 1991), and Price v.
Commissioner, 887 F.2d 959 (9th Cir. 1989)); Stevens v.
Commissioner, 872 F.2d 1499, 1505 (11th Cir. 1989), affg. T.C.
Memo. 1988-63; Levin v. Commissioner, T.C. Memo. 1987-67.
With regard specifically to large deductions resulting in
substantial understatements, the Court of Appeals to which appeal
in this case lies has stated that a taxpayer claiming innocent
spouse status must establish that he or she was "unaware of the
circumstances that gave rise to the error on the tax return".
Hayman v. Commissioner, supra at 1262. A duty to inquire also
exists as to the propriety of large deductions reported on joint
tax returns. Friedman v. Commissioner, supra; Hayman v.
Commissioner, supra; Levin v. Commissioner, supra.
We believe that petitioner has met her burden of proof under
the "reason to know" test of section 6013(e) as to both the
embezzlement income and the $585,000 erroneously claimed Keogh
deduction. The evidence indicates that petitioner’s
participation in the family finances was very limited and that
Martin was extremely autocratic and private in handling his and
the family’s financial affairs. Martin admitted that he
disclosed very little to petitioner regarding his financial
activities. Martin generally concealed information from
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