- 47 -
duty to seek advice from her own independent legal and financial
advisers”. Friedman v. Commissioner, 53 F.3d at 531. Even if
petitioner had asked any questions, her lack of financial
sophistication, her nonexistent role in Mr. Heitzman’s business
and investment activities, and Mr. Heitzman’s attitude toward
petitioner’s participation in those affairs, would have allowed
her to uncover no more than she already knew. Had Mr. Heitzman
shown petitioner the pertinent documents, their aura of
verisimilitude would have provided her with little to question.
The fundamental mendacity of the documents could have been
uncovered only by a much more sophisticated and skeptical
investor--which, in 1980, petitioner was not. Even the warning
to seek the opinion of independent tax counsel would not have
caused petitioner to question the deductions claimed on the
return because the return bore the imprimatur of an independent
and respected income tax return preparer.
For purposes of sec. 6013(e)(1)(C), we find that, under the
circumstances of this case, petitioner neither knew nor had
reason to know of the understatement on the 1979 joint income tax
return. She had no effective knowledge of the relevant
underlying transaction nor did she have a duty to inquire into
the validity of the deductions arising from the transaction that
were claimed on the 1979 joint income tax return. Bokum v.
Commissioner, 94 T.C. at 145-148; Flynn v. Commissioner, 93 T.C.
at 365-366.
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