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Accordingly, we proceed to consider whether petitioner knew
or had reason to know of the substantial understatement.
II. Whether Petitioner Knew or Had Reason To Know of the
Substantial Understatement
A. In General
In 1998 section 6013(e) was repealed, and section 6015
replaced it.5 The requirement of section 6015(b)(1)(C) is
similar to the requirement of former section 6013(e)(1)(C) in
that both provisions require a spouse who is seeking relief to
establish that “in signing the return, he or she did not know,
and had no reason to know” of the understatement. Because of the
similarities, analysis in opinions concerning section
6013(e)(1)(C) is instructive for our analysis of section
6015(b)(1)(C). See Jonson v. Commissioner, 118 T.C. 106 (2002);
Butler v. Commissioner, 114 T.C. 276, 283 (2000).
B. The “Reason To Know” Standard To Be Followed in This
Case
In deciding “reason to know” cases, the Court of Appeals for
the Ninth Circuit has made the distinction that in erroneous
deduction cases, unlike omission of income cases, mere knowledge
of a transaction underlying a deduction, by itself, is not enough
to deny innocent spouse relief. See Price v. Commissioner, 887
5 Sec. 6015 was added by sec. 3201(a) of the Internal
Revenue Service Restructuring and Reform Act of 1998, Pub. L.
105-206, 112 Stat. 685, 734. Sec. 6015 is effective with respect
to any tax liability arising after July 22, 1998, and any tax
liability arising on or before July 22, 1998, that is unpaid on
that date.
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