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1992, and she did not ask to see that return until May 1994.
Consequently, we conclude that petitioner failed to fulfill her
duty of inquiry. Because petitioner is charged with constructive
knowledge of the manner in which her income was treated on the
first amended joint return and of the understatement of tax that
resulted from that treatment, we conclude that she had reason to
know of the understatement on that return.
Petitioner contends that the understatement on the first
amended joint return is attributable to erroneous items of
Apostle (i.e., the exclusion from gain claimed under section 121
and the deferral of gain recognition under section 1034) and
that, as a result, the 1992-1994 interest liability is solely
attributable to him. Petitioner dedicates most of her argument
to accusing Apostle of fraud and to berating the IRS for not
pursuing action against him. Petitioner’s arguments are not
persuasive, and her contention cannot be sustained.
Petitioner relied on Apostle and their accountant to
complete and file the first amended joint return. The first
amended joint return, and the understatement of income on that
return, however, dealt specifically with the $564,000 gain that
petitioner realized on the sale of the New York apartment.
Petitioner is responsible for the manner in which her income was
treated on that return. Therefore, the items affecting the
treatment of her income on the first amended joint return are her
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