- 20 -
Moreover, although the foregoing failure to meet the
attribution prong of section 6015(b)(1)(B) is a sufficient basis
on which to deny relief under that subsection, we point out for
the sake of completeness that other requisites of section 6015(b)
are equally unfulfilled on the facts before us. In particular,
section 6015(b)(1)(C) mandates that the requesting spouse have
had neither knowledge nor reason to know of the understatement at
the time the return was signed. A requesting spouse is
considered to have reason to know in this context if a reasonably
prudent taxpayer in his or her position, at the time the return
was signed, could be expected to know that the return contained
an understatement or that further investigation was warranted.
Butler v. Commissioner, supra at 283. Hence, the spouse seeking
relief has a “duty of inquiry”. Id. at 284. In applying the
foregoing “reason to know” standard, factors considered relevant
include:
(1) The alleged innocent spouse’s level of education;
(2) the spouse’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 income levels, income standards, and
spending patterns; and (4) the culpable spouse’s
evasiveness and deceit concerning the couple’s
finances. [Id.]
Here, the return at issue was signed on August 12, 1996, and
reported total income of $108,547. As of that date, the evidence
regarding petitioner’s knowledge in general and the majority of
the above factors in particular is in many respects inconsistent
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011