Kathleen E. Gilliam - Page 9

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               ii.  Knowledge, or Reason To Know                                      
               Petitioner was aware of her income.  She claims to be                  
          unaware that her income was omitted from the joint return that              
          her husband prepared.  The spouse seeking relief knows of an                
          understatement of tax if she knows of the transaction that gave             
          rise to the understatement.  Purcell v. Commissioner, 826 F.2d              
          470, 473-474 (6th Cir. 1987), affg. 86 T.C. 228 (1986).  A                  
          taxpayer seeking to prove that she had no knowledge or reason to            
          know of an item giving rise to the understatement of tax must               
          demonstrate that she has fulfilled a “duty of inquiry” with                 
          respect to determining that the correct tax liability was                   
          reported on the return.  Stevens v. Commissioner, 872 F.2d 1499,            
          1505 (11th Cir. 1989), affg. T.C. Memo. 1988-63; Butler v.                  
          Commissioner, 114 T.C. at 284; Cohen v. Commissioner, T.C. Memo.            
          1987-537.  Given that the return was rather straightforward,                
          requiring only the reporting of wage income with petitioner’s               
          Forms W-2 attached, we find it difficult to believe that                    
          petitioner did not know or have reason to know that her wage                
          income was not reported on the return.  This factor is also                 
          squarely against petitioner.                                                
               iii.  Significant Benefit                                              
               Petitioner benefited in that she received a portion of the             
          refund which resulted from the withholding from Mr. Gilliam’s               
          wages.  The overpayment and ultimate refund would have been                 

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