Alicia M. Elias - Page 7

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          other personal expenses.  By petitioner’s stipulation to be bound           
          in Mr. Elias’s case, petitioner, in effect, conceded respondent’s           
          determinations for and the reasons for the disallowance of such             
          items as trade or business expenses.  Although petitioner in this           
          case did not challenge these determinations, her contention is              
          that she did not know and had no reason to know that these items            
          had been claimed as trade or business expenses on their joint               
          return.  Petitioner knew the personal nature of these underlying            
          transactions giving rise to the deficiency.  In Levy v.                     
          Commissioner, T.C. Memo. 2005-92, the Court held that the                   
          standard to be applied in such a situation is whether a                     
          reasonably prudent taxpayer under the circumstances of the spouse           
          requesting relief at the time of signing the return could be                
          expected to know that the tax liability on the return was                   
          erroneous or that further investigation was warranted.  At trial,           
          petitioner admitted that she had a college degree in business;              
          consequently, the Court is satisfied that petitioner, based on              
          her educational background as well as her own business                      
          experience, knew or should have known the nature of expenses that           
          could or could not be deducted in determining the net income of             
          an activity subject to an income tax on its net profits.                    
          Moreover, the Court notes that some of these expenses personally            
          benefited petitioner; consequently, it would not be inequitable,            
          in the Court’s view, to hold petitioner liable for the tax                  






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