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Memo. 1988-63; Winnett v. Commissioner, 96 T.C. 802, 812 (1991);
Bokum v. Commissioner, supra at 138; Flynn v. Commissioner, 93
T.C. 355 (1989); Terzian v. Commissioner, 72 T.C. 1164 (1979).
Factors to consider in analyzing whether a taxpayer seeking
relief from joint and several liability had reason to know of the
understatement include: (1) The taxpayer’s level of education;
(2) the taxpayer’s involvement in the family’s business and
financial affairs; (3) the presence of expenditures that appear
lavish or unusual when compared to the family’s past levels of
income, standard of living, and spending patterns; and (4) the
culpable spouse’s evasiveness and deceit concerning the couple’s
finances. See Price v. Commissioner, supra at 965 (citing
Stevens v. Commissioner, supra at 1505); Varney v. Commissioner,
T.C. Memo. 1991-14. “The question we must ask is whether
petitioner’s active and knowledgeable participation in the
subject transaction(s) rose to a level where he * * * had reason
to know of the * * * understatement.” Pulliam v. Commissioner,
T.C. Memo. 1994-609.
Applying the factors used to determine whether a taxpayer
had reason to know of the understatement confirms that petitioner
did not have constructive knowledge of the underlying transaction
or of the understatement resulting from the transaction. There
is nothing in the record to support a conclusion that petitioner,
a high school graduate with 3 years of college education, had any
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