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bankruptcy on May 1, 1992, and received a discharge on May 23,
1997. This Court concluded that, while the taxpayer lacked
knowledge or reason to know that the taxes for 1989 would not be
paid, she knew or had reason to know that the 1990 and 1991
liabilities would be unpaid because the return for 1990 preceded
the bankruptcy petition by only a little over 7 months and the
return for 1991 was filed during pendency of the bankruptcy case.
In Morello v. Commissioner, T.C. Memo. 2004-181, the
taxpayer’s husband lost his job in 1992, and she returned to work
after more than 20 years as a homemaker, in order to help relieve
resultant financial difficulties. By the time tax returns for
1992 through 1995 were signed and filed in 1996, financial
pressures, including mortgage foreclosure proceedings and the
fact that her husband was contemplating and then did file for
bankruptcy, had continued to plague the family for a number of
years. Because the taxpayer was aware of these circumstances, we
held that she had not established that it was reasonable for her
to believe that the balances shown as due on the returns would be
paid.
Given the foregoing, the Court cannot conclude that the
facts of this case are consistent with a reasonable belief that
the taxes would be paid. Accordingly, petitioner has not shown
that, at the times she signed the 1997 and 1999 returns, she had
no knowledge or reason to know that the taxes would not be paid.
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