Ann Marie Bright - Page 11

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          (1) Knew or had reason to know at the time that she signed the              
          return that the liability reported on the joint return for 1995             
          would not be paid; and (2) has not demonstrated that she will               
          suffer economic hardship if relief is not granted.                          
               The relevant knowledge in the case of a reported but unpaid            
          liability is whether when the return was signed, the taxpayer               
          knew or had reason to know “that the tax would not be paid.”  Id.           
          sec. 4.02(1)(b).  Accordingly, we must consider whether, “taking            
          into account all the facts and circumstances”, petitioner knew or           
          had reason to know that her former spouse would not pay the taxes           
          on his self-employment income shown as due on the tax return for            
          the taxable year in issue.  See sec. 6015(f)(1).                            
               Petitioner contends that she had no knowledge that the                 
          unpaid 1995 joint tax liability would not be paid by her former             
          spouse.  Petitioner did know that there was income tax due for              
          the taxable year in issue when she signed the tax return.                   
          However, petitioner testified that her former spouse had a                  
          pattern of “filing late, paying late, but having payment                    
          agreements with the IRS.”  Petitioner further testified that when           
          she signed the 1995 joint return “there was no reason for me to             
          think otherwise at that time that the [1995] taxes would not be             
          paid in a similar fashion, that we would get an installment                 
          agreement and that that would be how those taxes would be paid.”            
          Having observed petitioner’s demeanor at trial, we find her                 






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