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operation of Mike’s Painting, she was unaware of the business’s
financial transactions, and she did not have access to the
business records. The evidence in the record shows that
intervenor maintained a separate individual business account for
Mike’s Painting, and he admitted at trial that petitioner did not
have signatory authority on the account. At trial, Ms. Abney
testified that she prepared the 1993 Schedule C based on check
stubs, receipts, and invoices, which were provided to her in
plastic bags. She testified that she was not provided with any
computer printouts and that she did not know whether petitioner
used her computer to maintain business records for Mike’s
Painting. Ms. Abney further testified that she did not sit down
with petitioner and go over the business records pertaining to
Mike’s Painting. Intervenor’s testimony that petitioner was
involved in the operation of Mike’s Painting and maintained the
business records is not corroborated by other testimony and is
not supported by the evidence in the record. But even if
petitioner had some involvement with the business, there is no
evidence in the record that she had knowledge of the facts that
gave rise to the deficiency. Accordingly, we conclude that
petitioner did not have actual knowledge of the factual
circumstances which made the business expenses unallowable as
deductions, because it has not been shown that petitioner knew or
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Last modified: May 25, 2011