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THE COURT: Has that always been the case?
THE WITNESS: No. Since this incident, she pays
90 percent of the bills, and she looks at my checking
account now, too.
We find this testimony eminently credible. Once Linda’s
suspicions were triggered, instead of “burying her head in the
sand” as the Commissioner has argued, she took steps to stay on
top of everything happening in the family finances. But we find
that her duty of inquiry was never triggered before the raid, and
so conclude that Linda neither knew nor had reason to know of the
income omitted from their tax returns.
B. Equitable Considerations--Section 6015(b)(1)(D)
Section 6015(b)(1)(D) requires that Linda prove that being
held liable would be inequitable. The old regulation addressed
inequity in only a general and open-ended way:
Whether it is inequitable to hold a person
liable for the deficiency in tax * * * is to
be determined on the basis of all the facts
and circumstances. In making such a
determination a factor to be considered is
whether the person seeking relief
significantly benefited, directly or
indirectly, from the items omitted from gross
income. However, normal support is not a
significant "benefit" for purposes of this
determination. * * * Other factors which may
also be taken into account, if the situation
warrants, include the fact that the person
seeking relief has been deserted by his
spouse or the fact that he has been divorced
or separated from such spouse.
Sec. 1.6013-5(b), Income Tax Regs., superseded by sec. 1.6015-2,
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