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individuals more financially astute than Ms. Walters. We are
convinced that Mr. Gherman also managed to convince Ms. Walters
and other family members that the family "fortune" came from his
financial expertise.
Respondent contends further that Ms. Walters should have
known about the unreported income, because the income reported on
petitioners' tax returns for the applicable years could not
support their lifestyle. Beyond general references to
petitioners' "level of expenditures", information about their
personal residence, the use of household help, and their use of
the Camelot, the record is vague as to the nature of Ms. Walters'
standard of living during 1984, 1985, and 1986. Consequently, it
is not clear whether petitioners' reported gross income of
$477,197, $498,634, and $533,901 for 1984, 1985, and 1986,
respectively, could have supported that lifestyle. Nonetheless,
having observed Ms. Walters at trial and having heard her
testimony and considering the circumstances, we are persuaded
that Ms. Walters believed the reported income for those years was
sufficient to support their lifestyle.
Ms. Walters did not sign blank tax returns. She reviewed
the returns at least to the point of checking to ascertain how
much money Mr. Gherman was earning. Consequently, she was aware
that petitioners reported gross income of close to half a million
dollars for each of the applicable years. We are persuaded that,
in light of her limited education and lack of business expertise,
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