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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.
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