- 6 -
throughout the marriage, including the years of
defalcation, there was no dramatic change. * * *
Importantly, there was evidence that the Sympsons had
sufficient cash flow from sources other than the
unreported income to more than cover their family
expenditures during this period. [Id. at 95-2257, 95-1
USTC par. 50,276, at 88,020-88,021.]
So instructed, we conclude that the Court of Appeals would find
that the increasing expenditures would not have given Mrs.
Sympson reason to know. Therefore, we find that, for tax years
1982, 1983, 1984, 1985, and 1986, Mrs. Sympson did not have
reason to know of the substantial understatement.
For 1987, however, another factor is present. Mr. Sympson's
thefts were discovered in July of that year. Mrs. Sympson became
aware of the problem soon after, when her father told her that
all the furniture was gone out of Mr. Sympson's office, and she
learned that he had been fired. In August or September 1987,
Robert asked her to sign deeds on various properties, telling her
that there was a problem with Mrs. Roderick's funds. In early
1988, Mrs. Sympson was served with a copy of a State court suit
for more than $14 million. She read the complaint, which accused
her husband of stealing from Mrs. Roderick.
In the spring of 1988, Mrs. Sympson was told by attorneys
that there could be a tax problem with the misappropriated funds.
When her husband told her he would treat the withdrawals from
Mrs. Roderick's accounts as loans on their income tax return,
Mrs. Sympson accepted that without further question, even though
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