- 8 - petitioner was not involved in Wee Ones Child Care, other than as a handyperson, providing maintenance assistance to Ms. Moore. His assistance to his former spouse in the initial funding and his purchase of some supplies does not create a joint venture, as suggested by respondent. Thus, we conclude that petitioner satisfies section 6015(b)(1)(B). The second of the three remaining elements of section 6015(b)(1) requires that petitioner, in signing the return, did not know, and had no reason to know, that there was an understatement. See Grossman v. Commissioner, 182 F.3d 275, 279- 280 (4th Cir. 1999), affg. T.C. Memo. 1996-452. A requesting spouse has knowledge or reason to know of an understatement if he or she actually knew of the understatement, or if a reasonably prudent taxpayer in his or her position, at the time he or she signed the return, could be expected to know that the return contained an understatement or that further investigation was warranted.3 Butler v. Commissioner, supra at 283. In deciding whether a spouse has reason to know of an understatement, we undertake a subjective inquiry, and we recognize several factors 3 Secs. 1.6015-2 and 1.6015-3, Income Tax Regs., do not apply to the present case because petitioner’s request for relief was filed before the regulation’s effective date of July 18, 2002. See sec. 1.6015-9, Income Tax Regs. Nevertheless, application of those regulations to the present case would yield the same result, that is, petitioner did not know or have reason to know of the understatement of tax attributable to the Schedule C deductions of Wee Ones Child Care.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
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