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During petitioner’s marriage to Mr. Washington, petitioner
paid the tax on her wages through withholding, and Mr. Washington
paid the taxes attributable to his business. Mr. Washington
controlled all aspects of his business, and he conducted his
business affairs without any assistance or involvement from
petitioner. The record and petitioner’s credible testimony
demonstrate that petitioner had no knowledge of, or involvement in,
her former husband’s business. (We found petitioner to be credible
after having observed her appearance and demeanor at trial.) We
conclude that petitioner had no knowledge or reason to know at the
time the returns were signed that the reported liability would not
be paid by Mr. Washington.
Assuming arguendo that petitioner had reason to know that the
reported 1989 tax liability would not be paid, other factors in
favor of granting petitioner equitable relief are unusually strong
in this case. And “when the factors in favor of equitable relief
are unusually strong, it may be appropriate to grant relief under
section 6015(f) in limited situations where the requesting spouse
knew or had reason to know that the liability would not be paid”.
Rev. Proc. 2000-15, sec. 4.03(2)(b), 2000-1 C.B. at 449. Thus,
even if petitioner knew or had reason to know that the reported
liability would not be paid, on the basis of all the facts and
circumstances of this case, we find that compelling reasons existed
for respondent to grant petitioner equitable relief.
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