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liability in a deduction case “‘by simply turning a blind eye
to–-by preferring not to know of–-facts fully disclosed on a
return, of such a large nature as would reasonably put such
spouse on notice that further inquiry would need to be made’”.
Price v. Commissioner, supra at 965 (quoting Levin v.
Commissioner, T.C. Memo. 1987-67). Petitioner made no inquiry as
to the validity of the deductions. Her duty of inquiry thus went
unfulfilled. Accordingly, we hold that petitioner possessed
constructive knowledge of the understatement for purposes of
section 6015(b)(1)(C).
D. The Equities–-Sec. 6015(b)(1)(D)
Even had petitioner satisfied the knowledge requirement
under section 6015(b)(1)(C), she would have failed to qualify for
relief from joint and several liability by reason of section
6015(b)(1)(D). Pursuant to section 6015(b)(1)(D), a spouse
seeking relief under section 6015(b)(1) must establish that it is
inequitable to hold him or her liable for the deficiency
attributable to the understatement. This determination must be
made based upon due consideration of all the facts and
circumstances. See sec. 1.6013-5(b), Income Tax Regs. For
reasons discussed below, we find that the imposition of joint and
several liability in this case is not inequitable.
Petitioner’s principal argument regarding the equities in
this case is grounded in the possibility that her husband will
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