- 50 -
Respondent concedes that Mrs. Reaves filed a joint return
with Mr. Reaves for each year in issue and that all items are
grossly erroneous because they are omitted income, but disputes
that they are attributable to Mr. Reaves.9
We conclude that Mrs. Reaves knew or had reason to know of
the understatements (other than those relating to the 282 checks)
when she signed the returns and that it is not inequitable to
hold her liable for tax.
2. Knowledge of the Understatements on the Returns
To be entitled to relief as an innocent spouse, Mrs. Reaves
must show that she did not know and had no reason to know that
there were understatements on the returns for the years in issue.
Sec. 6013(e)(1)(C).
Mrs. Reaves maintained her family's financial records. She
gave Davis the items that he used to prepare their income tax
returns. She was vice president of Reaves Livestock and was
authorized to sign its checks. She knew that checks were written
on the First Citizens accounts for items that petitioners
conceded are personal. She also knew that checks were written
for personal items, such as for her beach house furniture, on the
Reaves Livestock account. She routinely signed and cashed checks
9 Respondent concedes that Mrs. Reaves is an innocent spouse
with respect to the 282 checks.
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