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On the record before us, we find that a reasonably prudent
taxpayer under petitioner’s circumstances at the time of signing
the 1982 joint tax return could not have been expected to know
that the tax liability stated in that return was erroneous.
It is respondent’s position that, even if the Court were to
find, as we have, that a reasonably prudent taxpayer under
petitioner’s circumstances at the time of signing the 1982 joint
tax return could not have been expected to know that the tax
liability stated in that return was erroneous, petitioner none-
theless had a duty to investigate further whether the tax liabil-
ity stated in that return was erroneous (duty to inquire). In
support of that position, respondent states:
Had petitioner reviewed the 1982 return, she would have
discovered that she and Mr. Korchak were claiming a
substantial loss and tax credit attributable to the
Madison investment, as that information was clearly set
forth in a schedule attached to the return. The Madi-
son loss [of $58,089] and tax credit [totaling
$114,407] were large enough to put her on notice that
further inquiry was warranted to determine the legiti-
macy of those tax benefits. Thus, under the Bokum
standard, she had reason to know of the understatement.
With respect to the claimed Madison Recycling credits of
$114,407, we disagree with respondent’s contention that those
claimed credits were “clearly set forth in a schedule attached to
the return.” As discussed above, we have found that it was not
obvious from reviewing Form 3468 included with the 1982 joint tax
25(...continued)
our findings and conclusions herein.
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