Estate of Robert E. Sympson, Deceased, Elizabeth C. Sympson Personal Representative and Elizabeth C. Sympson - Page 4

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               We now turn, as instructed, to the question of whether Mrs.            
          Sympson has established that she neither knew nor had reason to             
          know that the returns she signed contained a substantial                    
          understatement of tax.  Id.; sec. 6013(e)(1)(C).                            
               Respondent agrees, and we so find, that Mrs. Sympson had no            
          actual knowledge of the embezzlement before her husband was                 
          caught.  Thus, the question is whether she had reason to know of            
          the understatements on the returns for tax years 1982 through               
          1986, and whether she had actual knowledge or reason to know for            
          tax year 1987.                                                              
               In deciding whether Mrs. Sympson "had reason to know" of the           
          substantial understatements when she signed the returns, we take            
          into account:  (1) her level of education; (2) her involvement in           
          the family's business and financial affairs; (3) the presence of            
          expenditures that appear lavish or unusual when compared with the           
          family's past levels of income, standard of living, and spending            
          pattern; and (4) the culpable spouse's evasiveness and deceit               
          concerning their finances.  Friedman v. Commissioner, 53 F.3d               
          523, 531-532 (2d Cir. 1995) (citing Hayman v. Commissioner, 992             
          F.2d 1256, 1261 (2d Cir. 1993), affg. T.C. Memo. 1992-228), affg.           
          in part and revg. in part T.C. Memo. 1993-549.  The foregoing               
          factors are considered "because, ordinarily, they predict what a            
          prudent person would realize regardless of the other spouse's               

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