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whether or not to make an investment before any investment was
made.
Petitioner was shown the documents relating to the Hoyt
investments, signed Hoyt investment documents, was aware that the
Hoyt investment was supposed to result in substantial tax
savings, and attended Hoyt investor meetings.6 Petitioner was
aware of the large deductions taken on her joint tax returns
associated with the Hoyt investments. The Hoyt investment
materials she was shown and had the opportunity to review
apprised her of tax risks associated with the investment. These
facts establish that petitioner had “reason to know”. See Jonson
v. Commissioner, supra at 117.
Petitioner argues that her health issues limited her
involvement in financial affairs. In the mid-1970s, petitioner
was diagnosed with sarcoidosis--a disease that affects the
lymphatic system. Petitioner developed tumors in her body and
has a reduced lung capacity. Despite her illness, the
testimonial and documentary evidence establishes that petitioner
participated in the family’s financial affairs.
c. Expenditures, etc.
The evidence does not establish that the tax savings
generated by the Hoyt investments resulted in lavish or unusual
expenditures benefiting petitioner compared to prior years’
6 Although petitioner claimed not to attend Hoyt meetings,
her testimony was contradicted by Christopher’s testimony and the
documentary evidence.
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