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that are relevant to our analysis, including but not limited to:
(1) The alleged innocent spouse’s level of education; (2) the
spouse’s involvement in the family’s business and financial
affairs; and (3) the culpable spouse’s evasiveness and deceit
concerning the couple’s finances. Id. at 284.
In the present case, we conclude that petitioner did not
have actual knowledge of the understatement of tax attributable
to the Schedule C deductions of Wee Ones Child Care.
Petitioner’s knowledge of Wee Ones Child Care as the source of an
erroneous item is not sufficient to establish actual knowledge.
Moreover, we find that a reasonably prudent person in
petitioner’s circumstances would not know of the understatement.
Petitioner was employed full time outside the home as a
maintenance supervisor. Petitioner has limited education. Ms.
Moore ran Wee Ones Child Care, maintained the books and records
and prepared the tax returns. Thus, petitioner had no direct
involvement in the business, other than as a handyperson and as a
provider of startup costs. We are thus convinced that petitioner
satisfies the requirements of section 6015(b)(1)(C).
The last of the three remaining elements of section
6015(b)(1), whether it is inequitable to hold a spouse liable for
a deficiency, is determined by “taking into account all the facts
and circumstances”. The equitable factors we consider under
section 6015(b)(1)(D) are the same as those we consider under
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