Beverly D. Goings - Page 16

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          understatements and that it would not be inequitable to hold her            
          liable for the deficiencies attributable to those                           
          understatements.  Petitioner disagrees.                                     
               Section 6013(e)(1)(C)                                                  
               In resolving whether petitioner had reason to know that the            
          returns she signed for the years at issue contained substantial             
          understatements within the meaning of section 6013(e)(1)(C), the            
          Court must inquire whether a reasonably prudent person, under the           
          circumstances of petitioner, could have been expected to know at            
          the time of signing each return that each such return contained a           
          substantial understatement or that further investigation was                
          warranted.   Bliss v. Commissioner, 59 F.3d 374, 378 (2d Cir.               
          1995), affg. T.C. Memo. 1993-390; Park v. Commissioner, supra at            
          1293 (citing Sanders v. United States, supra at 166-167 and n.5);           
          Bokum v. Commissioner, supra at 148.  The relevant knowledge is             
          of the transaction giving rise to the income omitted from the               
          return, rather than of the tax consequences of such transaction.            
          Quinn v. Commissioner, 524 F.2d 617, 626 (7th Cir. 1975), affg.             
          62 T.C. 223 (1974).  Consequently, a spouse who has reason to               
          know of such a transaction does not qualify for relief as an                
          "innocent spouse".  Park v. Commissioner, supra; Sanders v.                 
          United States, supra.  Additionally, a spouse may have a duty to            
          inquire further if he or she knows enough facts so as to be                 
          placed on notice of the possibility of a substantial                        
          understatement.  Guth v. Commissioner, 897 F.2d 441, 444-445 (9th           




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