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agreement. That agreement was the product of arm’s length
negotiations between petitioner and Levy. Petitioner and Levy
were adversaries, and each was represented by his or her own
divorce attorney. In the dissolution of the marital
relationship, petitioner insisted that Levy agree to be liable
exclusively for the tax liabilities. Although shortly after the
divorce on June 13, 2002, Levy filed for and obtained a
bankruptcy discharge from the tax liabilities, at the time the
marital settlement agreement was entered, petitioner and her
attorney had not anticipated the bankruptcy and discharge of
Levy. Petitioner did not know or have reason to know then that
Levy would attempt to avoid paying the tax liabilities by
obtaining a bankruptcy discharge.
We also disagree with respondent’s contention that
petitioner’s continuance of her efforts to seek innocent spouse
relief for 1979 and 1991 through 1999 after the conclusion of the
marital settlement agreement somehow establishes that she knew
Levy would not honor his obligation under that agreement to pay
those tax liabilities. In continuing to prosecute her claim for
innocent spouse relief, petitioner was acting in her own best
interest. As of June 28, 2001, the 1979 and 1991 through 1999
tax liabilities were estimated to be more than $718,000. The
marital settlement agreement between petitioner and Levy (under
which Levy agreed to be liable exclusively for those tax
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