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claimed basis for their deductions. They put their trust
entirely in the Hoyt organization to determine the basis for,
propriety of, and amount of their deductions.
Moreover, the documentary evidence supports petitioner’s
contention that she had no involvement with the Shorthorn
partnership. Intervenor signed all of the documents offered in
evidence; petitioner signed none of them. Intervenor asserted in
his intervention papers that petitioner attended a meeting with
the Hoyt organization, but his actual testimony on this point was
uncertain:
A: As far as I know she went with me to
the one and only meeting I went to.
Court: As far as you know, or as far as you recall.
A: As far as I recall.
Petitioner denied ever attending a meeting or knowing any of the
people involved in the Hoyt matter. On balance, we believe
petitioner has met her burden of proving by a preponderance of
the evidence that she had no involvement with the Shorthorn
partnership. She clearly lacked actual knowledge of the facts
giving rise to the understatement.
However, petitioner had “reason to know” of the
understatement. The partnership losses were simply too large in
relation to petitioner and intervenor’s joint income for a
reasonably prudent person with petitioner’s level of education to
ignore. Petitioner and intervenor’s joint Federal income tax
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