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relief to the extent that the income tax liability is
attributable to that portion. [Id. sec. 4.02(1)(b),
2003-C.B. at 298.]
Petitioner argues that respondent erred in concluding that
she possessed knowledge or reason to know that the taxes would
not be paid. As to 1997, petitioner contends that she had a
reasonable belief that the taxes would be paid either out of the
bankruptcy proceeding, from Dr. Banderas’s pension plan, or from
future earnings obtained through Dr. Banderas’s returning to
work. As to 1999, petitioner alleges that she reasonably
believed that the taxes would be paid from funds remaining after
the close of the bankruptcy proceeding, particularly in light of
the additional $750,000 received by the bankruptcy estate from a
life insurance policy on Dr. Banderas.
Petitioner testified regarding payment of the balances due
on the 1997 and 1999 returns, of which she was concededly aware.
The following colloquy on direct examination dealt with 1997:
Q Did your husband attempt to pay the 1997
taxes?
A We didn’t--we had no access to the money at
that time. It was in the Bankruptcy Court, and we--
Q So the bankruptcy was filed in 1997?
A Right. Before we filed the return.
Q And the return was filed in 1998?
A Right.
Q And all the funds were tied up in bankruptcy?
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