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an understatement if “a reasonably prudent person with knowledge
of the facts possessed by the person claiming * * * [relief]
should have been alerted to the possibility of a substantial
understatement.” Flynn v. Commissioner, 93 T.C. 355, 365 (1989).
Furthermore, a “spouse seeking relief has a ‘duty of inquiry’.”
Butler v. Commissioner, 114 T.C. 276, 284 (2000) (quoting Stevens
v. Commissioner, 872 F.2d 1499, 1505 (11th Cir. 1989), affg. T.C.
Memo. 1988-63).
Respondent argues that Ms. Skoller was put on notice
regarding petitioners’ claimed $96,211 business bad debt
deduction. We agree. “[A] spouse cannot obtain the benefits of
section * * * [6015] by simply turning a blind eye to–-by
preferring not to know of–-facts fully disclosed on the return,
of such a large nature as would reasonably put such spouse on
notice that further inquiry would need to be made.” Levin v.
Commissioner, T.C. Memo. 1987-67; see also Cohen v. Commissioner,
T.C. Memo. 1987-537.
A reasonably prudent taxpayer should have been alerted to
the possibility of an understatement on petitioners’ 1994 Federal
income tax return. On page 1 of Form 1040, U.S. Individual
Income Tax Return, petitioners, inter alia, reported $5,052 of
income from Ms. Skoller’s wages, a capital gain of $9,734, and an
alleged $69,788 loss from Mr. Skoller’s business. On page 2 of
Form 1040 (the page Ms. Skoller signed), petitioners reported
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Last modified: May 25, 2011