- 46 - had reason to know of the understatement in the 1982 joint tax return. In making that determination, we bear in mind that a requesting spouse has reason to know of an understatement if a reasonably prudent taxpayer under the circumstances of the requesting spouse at the time of signing a tax return could have been expected to know that the tax liability stated in such return was erroneous or that further investigation was warranted. Stevens v. Commissioner, 872 F.2d 1499, 1505 (11th Cir. 1989), affg. T.C. Memo. 1988-63; Shea v. Commissioner, 780 F.2d 561, 566 (6th Cir. 1986), affg. in part and revg. in part on another ground T.C. Memo. 1984-310; Bokum v. Commissioner, supra. In resolving whether in signing a tax return a requesting spouse had reason to know of the understatement in such return, we consider whether the requesting spouse was aware of the circumstances of the transaction(s) that gave rise to the er- ror(s) in such return. See Bokum v. Commissioner, supra at 145- 146.21 In making that determination, we may examine several factors, including: (1) The requesting spouse’s level of educa- tion; (2) the requesting spouse’s involvement in the family’s financial affairs; (3) the nonrequesting spouse’s evasiveness and deceit concerning the family’s financial affairs; and (4) the presence of expenditures that are lavish or unusual when compared to the requesting spouse’s past standard of living. See Stevens 21See also Hillman v. Commissioner, T.C. Memo. 1993-151.Page: Previous 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 Next
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