Sherry P. Aude - Page 19

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               Respondent asserts that a cursory review of the return would           
          have alerted petitioner to the erroneous loss deduction.                    
          Respondent alleges that a casual glance by petitioner would have            
          revealed that the deductions substantially reduced gross income             
          to arrive at adjusted gross income.  In addition, respondent                
          relies on the fact that petitioner knew the amount of her monthly           
          household expenditures, so that petitioner should have been aware           
          that "they were living tax free" in light of the differential               
          between those expenditures and the negative taxable income                  
          reported on their returns for the years at issue.  In light of              
          these factors, respondent contends that petitioner had a reason             
          to investigate.                                                             
               Even if a spouse has no "reason to know" of the substantial            
          understatement, the spouse may know facts that put her "on                  
          notice" of the understatement.  Price v. Commissioner, 887 F.2d             
          at 965; Stevens v. Commissioner, 872 F.2d at 1505.  With a duty             
          to inquire, the spouse seeking relief cannot turn a blind eye to            
          facts within his or her reach that would have put a reasonably              
          prudent taxpayer on notice to inquire further.  McCoy v.                    
          Commissioner, 57 T.C. 732, 734 (1972).  Petitioner would not                
          qualify for section 6013(e) relief merely because she relied on             
          others, such as her husband or a tax preparer, to complete the              
          return properly.  Hayman v. Commissioner, 992 F.2d 1256, 1262 (2d           
          Cir. 1993), affg. T.C. Memo. 1992-228; Park v. Commissioner, T.C.           
          Memo. 1993-252, affd. 25 F.3d 1289 (5th Cir. 1994).                         




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