- 18 - Mr. Campbell’s subsequent difficulties in the futures market, the Campbells were compelled to move from an affluent area of the Chicago suburbs to a rural area in Missouri, substantially downgrading their standard of living. Petitioner was forced to strip her retirement account and borrow money from her mother to pay for her husband’s $100,000 settlement with the IRS. All of these factors point to the conclusion that the Campbells’ standard of living deteriorated, rather than improved, after the London straddle. Taking all the facts and circumstances into consideration, we hold that petitioner did not have actual knowledge of the London straddle. Given this holding, we must decide whether a reasonably prudent taxpayer in petitioner’s circumstances had reason to know that the deduction was false or a duty to inquire about the deduction on the return. We conclude that petitioner did not have reason to know about the false deduction. Petitioner has established that she had no knowledge of the underlying transaction that gave rise to the deficiency. She was not involved in Mr. Campbell’s business affairs, she did not know about the London straddle, and she did not know that Mr. Campbell financed the London straddle with money taken from her account. We believe that petitioner’sPage: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
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