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tax would not be paid” when the return was signed or filed.7 See
Notice 98-61, sec. 3.03(2)(b); see also Rev. Proc. 2000-15, sec.
4.03(1)(d). Because the determination letter equated
petitioner’s signing of the return with actual or constructive
knowledge of the underpayment, it failed to consider the relevant
question of whether petitioner knew or had reason to know that
the tax would not be paid. Consequently, the determination
letter’s conclusion that petitioner knew or had reason to know of
the underpayment was arbitrary and without sound basis in fact.
We proceed to consider, “taking into account all the facts and
circumstances”, section 6015(f)(1), whether petitioner knew or
had reason to know that the tax shown as due on the 1994 return
would not be paid.
Petitioner gave credible testimony at trial. He testified
that Ms. Wiest had assumed responsibility for having the 1994
return prepared and filed, and that he turned over his Forms W-2
to her for that purpose. The testimony of the preparer of the
1994 return corroborates petitioner’s testimony. The preparer
testified that she was a high school acquaintance of Ms. Wiest,
not petitioner, and that it was Ms. Wiest who provided her with
7 Rev. Proc. 2000-15 revises Notice 98-61 with respect to
the time when it is relevant whether the taxpayer knew a tax
would not be paid. Rev. Proc. 2000-15 provides that the relevant
time is when the return is “signed”, whereas Notice 98-61
provides that it is when the return is “filed”. We do not
believe this distinction is material in this case.
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