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there were no loan documents and the supposed "lender" had
another view of the transfers. Mrs. Sympson signed the 1987
return on October 17, 1988. By that time she knew that her
husband had been accused of theft and fired, and that he and she
were being sued for millions of dollars. Moreover, a lawyer had
explicitly warned her of potential tax problems. The joint
income tax return she signed showed only $49,000 received from
Olga Roderick in 1987.
Generally, the question of whether a spouse knew or had
reason to know of a substantial understatement is governed by
whether a "reasonably prudent taxpayer under the circumstances of
the spouse at the time of signing the return could be expected to
know that the tax liability stated was erroneous or that further
investigation was warranted." Stevens v. Commissioner, 872 F.2d
1499, 1505 (11th Cir. 1989), affg. T.C. Memo. 1988-63; see Griner
v. Commissioner, 951 F.2d 360 (9th Cir. 1991), affg. without
published opinion T.C. Memo. 1990-301; Bokum v. Commissioner, 94
T.C. 126, 148 (1990), affd. 992 F.2d 1132 (11th Cir. 1993).
Mrs. Sympson is a college graduate who had owned and
operated an art gallery. She was not afraid of her husband or
mistreated by him. Trust does not eliminate a spouse's duty to
inquire when circumstances indicate further inquiry is necessary.
Hayman v. Commissioner, supra at 1262. We believe a reasonably
prudent person in Mrs. Sympson's circumstances would have
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