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requirements, the taxpayer establishes that he “did not know, and
had no reason to know” that the other spouse understated that
spouse’s tax liability on the return. Sec. 6015(b)(1)(C),
(b)(2). Petitioner asserts that he had no reason to know of the
understatement attributable to Ms. DeFore’s income from Mr. Hall
because petitioner and Ms. DeFore did not maintain a joint bank
account or commingle funds. Petitioner and Ms. DeFore divided
responsibility for the household expenses each month between
themselves and did not discuss finances or their mutual income
with each other. Petitioner merely paid the bills he owed for
any given month and retained the remainder of his paycheck. Ms.
DeFore did the same. Therefore, petitioner asserts he had no
reason to know how much income Ms. DeFore was earning from her
work for Mr. Hall. The Court disagrees.
Ms. DeFore submitted to the tax preparer at H&R Block only
one of three information returns she received for her work with
Mr. Hall during 2001. She included $2,658 as profit from a sole
proprietorship, Exchange Land Co., LTD. Ms. DeFore’s claimed
“sole proprietorship” profit was actually compensation for her
work with Mr. Hall. Ms. DeFore received additional nonemployment
compensation in the form of cash under two other company names,
$4,642 from TJR Partnership, LTD, and $5,235 from S G, Inc., both
of which were affiliated with Mr. Hall. Petitioner contends that
Ms. DeFore worked solely for Mr. Hall, who paid her primarily in
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