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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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