Phyllis E. Campbell - Page 18

                                       - 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’s                 









Page:  Previous  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  Next

Last modified: May 25, 2011