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If an individual who, but for paragraph (1)(C), would
be relieved of liability under paragraph (1),
establishes that in signing the return such individual
did not know, and had no reason to know, the extent of
such understatement, then such individual shall be
relieved of liability for tax * * * to the extent that
such liability is attributable to the portion of such
understatement of which such individual did not know
and had no reason to know.
Upon review of the record, we conclude that petitioner knew
the full extent of the understatement. Petitioner testified
that, at the time of signing the 1996 joint return, he knew that
Ms. Morrison was receiving monthly benefits. Similarly, the
record also reflects that, at the time of signing the joint
return, petitioner knew that Ms. Morrison applied for and
received a lump-sum benefit apart from her monthly benefit. What
is unclear is whether petitioner had knowledge of the amount of
benefits received by Ms. Morrison. During trial, petitioner and
Ms. Morrison provided conflicting testimony as to whether
petitioner noted the amount reflected on the benefit statement
when Ms. Morrison presented it to the return preparer. In
addition, the parties’ testimony conflicts as to whether the
parties discussed the specific amount of the benefit award.
The preponderance of evidence supports our holding that
petitioner had knowledge of the full amount of the benefit award.
Petitioner encouraged and prodded Ms. Morrison into applying for
benefits and assisted her in the application and reconsideration
process. The assistance he provided made him aware that Ms.
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