-14-
respect to the understated income of MPM.
College of Notre Dame Income
We next turn to Mrs. Marzullo's innocent spouse claim with
respect to the understatement resulting from the unreported income
from the College. In this regard, respondent concedes that Mrs.
Marzullo satisfied the first two elements of the statute. See sec.
6013(e)(1)(A) and (B).
Mrs. Marzullo claims that she had no actual knowledge or
reason to know of the unreported income from the accounts payable
account. See sec. 6013(e)(1)(C). We accept this claim. Mrs.
Marzullo had been married to Mr. Marzullo since 1962. She credibly
testified that when she married Mr. Marzullo, their marriage
partnership quickly evolved into a division of labor where Mr.
Marzullo was responsible for the family financial affairs and Mrs.
Marzullo cared for their home and children. Mrs. Marzullo trusted
Mr. Marzullo to properly handle the family's financial affairs. It
was not until Mr. Marzullo's criminal investigation in 1992 that
Mrs. Marzullo realized Mr. Marzullo had failed to report all
taxable income he received from the College.
Respondent asserts that Mrs. Marzullo must have known about
Mr. Marzullo's unreported income from the College because she knew
of the College's tuition waiver policy for female children of
employees and regretted that her sons could not benefit from the
waiver. The logic of respondent's assertion is flawed. Although
Mrs. Marzullo knew about the tuition waiver policy of the College
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