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her personal savings records to document her alleged capability
to make capital contributions and/or loans in the relatively
large amounts reflected in the business records. Finally, the
object of the transfer of assets to petitioner and the creation
of new entities, of which she was reflected as sole shareholder
or 98-percent limited partner, admittedly was to shield assets
from creditors of the Pierces and their business entities.
Lastly, Mr. Pierce openly discussed business matters with
petitioner, and he provided her with an explanation of any
document he asked petitioner to sign. In addition, Mr. Pierce
was not found to be a “culpable” spouse. Both petitioner and Mr.
Pierce relied on their accountants to properly assess the
validity of the NOL deductions that were ultimately disallowed.
In such situations:
Where the understatement results from “a
misapprehension of the income tax laws by the preparers
of the tax returns and the signatory parties,” both
husband and wife are perceived to be “innocent” and
there is “no inequity in holding them both to joint and
separate liability”. * * *
Hayman v. Commissioner, 992 F.2d at 1262 (quoting McCoy v.
Commissioner, 57 T.C. 732, 735 (1972)).
Petitioner was fully aware of the facts underlying the
transactions. In essence, her defense is premised solely on
ignorance of the law. Consequently, under the governing
precedent she is considered to know or have reason to know of the
substantial understatement.
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