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The factors weighing against relief are: (1)
petitioner had knowledge of the omitted income giving rise
to the deficiency, an extremely strong factor, and (2)
petitioner will not suffer economic hardship if relief is
not granted.
Respondent did not abuse his discretion in determining
that relief should not be granted to petitioner. The
overriding factor which weighs against the granting of
relief is petitioner’s knowledge of the items giving rise to
the understatement.
An important factor in this case is that the deficiency and
penalty are solely attributable to intervenor in that the
unreported income was earned solely by her. Furthermore,
intervenor most likely derived the primary benefit from this
income and from an initial lack of payment of taxes with respect
thereto: Intervenor and petitioner were separated for 9 months
during 1998 and, while petitioner had Federal income taxes
withheld from his income, intervenor had nothing withheld from
the unreported income.
The most important factor in this case is intervenor’s legal
obligation under the North Carolina court’s order to either
directly pay the 1998 Federal tax liability or indemnify
petitioner for his payment thereof. We note that this Court is
not being called upon to discern intervenor’s legal obligations
under the North Carolina court order because neither respondent
nor intervenor disputes the fact that intervenor is legally
obligated to pay the deficiency in this case. Furthermore,
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