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the tax consequences of the distributions on at least two
occasions, the information he received confirmed his belief that
the distributions were part of Ms. Braden’s nontaxable
inheritance.
What constitutes sufficient knowledge of the transaction in
this case can best be illustrated by comparing our decisions in
Cheshire v. Commissioner, 115 T.C. 183 (2000) (applying section
6015), and Varney v. Commissioner, supra (applying section
6013(e)). Both cases involved distributions to the taxpayer’s
spouse from retirement accounts in which the taxpayer’s spouse
owned an interest.
In Cheshire, the taxpayer had been informed by her husband
that he was contemplating retirement and was eligible to receive
a substantial sum of money from his retirement plan. The
taxpayer knew that her husband subsequently received the
distribution from his retirement plan. In fact, the taxpayer’s
husband showed the taxpayer the deposit slip reflecting the
deposit of the retirement plan distribution and discussed with
her the purposes for which the distribution would be used. See
Cheshire v. Commissioner, supra at 193. On these facts we
concluded the taxpayer had actual knowledge of the underlying
transaction that produced the omitted income and, therefore, the
taxpayer knew or had reason to know of the understatement.
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