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returns she had no reason to know that there were understatements
attributable to those items. See sec. 6015(b)(1)(C); Mora v.
Commissioner, 117 T.C. 279, 285 (2001). An individual has reason
to know of the understatement if a reasonably prudent taxpayer in
her position at the time she signed the return could be expected
to know that the return contained the understatement. See Price
v. Commissioner, 887 F.2d 959, 965 (9th Cir. 1989); Mora v.
Commissioner, supra at 287.
Petitioner claims that in signing the returns she had no
reason to know of the understatements on the returns because she
was unaware of Mr. Hopkins’s investments in Far West Drilling and
the other partnerships. Petitioner’s testimony at trial did not
convince us that she was unaware that those investments were made
or that Mr. Hopkins concealed his investments from her.9
Further, even a cursory review of the joint returns for 1980,
1982, and 1983 would reveal that there were investments in
partnerships for those years and that large partnership
deductions were claimed. The partnership deductions
substantially reduced petitioner and Mr. Hopkins’s tax
liabilities for those years and, together with other deductions,
9Petitioner’s testimony suggests that none of the
partnership investments reported on the joint returns were her
own. However, a Schedule K-1 for Shelter Associates III lists
petitioner as a partner in that entity in 1984.
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