Quentin Paul DeFore - Page 9

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          cash; therefore, petitioner believed all three companies who paid           
          Ms. DeFore nonemployment compensation were controlled by Mr.                
          Hall.  The return did not include the income from TJR Partnership           
          and S G, Inc., as reflected on the information returns issued by            
          these entities.                                                             
               A spouse has “reason to know” of an understatement of income           
          if “a reasonable prudent taxpayer in * * * [his] position at the            
          time * * * [he] signed the return could be expected to know that            
          the return contained the substantial understatement.”  Jonson v.            
          Commissioner, 118 T.C. 106, 116 (2002) (citing Price v.                     
          Commissioner, 887 F.2d 959, 965 (9th Cir. 1989)).  Although                 
          petitioner did not know the exact amount of Ms. DeFore’s                    
          compensation, he admitted he knew she worked for Mr. Hall for the           
          last 5 months of 2001. Furthermore, Ms. DeFore worked solely for            
          Mr. Hall during those months, and, during that time, Ms. DeFore             
          continued paying her portion of the bills.4  Using the reasonable           
          taxpayer standard, the Court concludes that petitioner had reason           
          to know that Ms. DeFore earned more than $2,658 in her 5 months             
          of working with Mr. Hall.  Therefore, petitioner is denied relief           
          under section 6015(b).                                                      
               The second avenue for relief is section 6015(c).  Section              
          6015(c) affords proportionate relief to a spouse through                    

               4    Petitioner did not testify as to the exact bills Ms.              
          DeFore was responsible for.                                                 





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