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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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