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Barrera entered into the marital settlement agreement. At the
time petitioner and Mr. Barrera entered into the marital
settlement agreement, Mr. Barrera was approximately 1 year into
serving his 27-month sentence for conspiring to defraud the
United States in connection with his mortgage brokerage business.
In the years prior to his conviction on this charge, Mr. Barrera
had lost his mortgage broker license, his mortgage brokerage
business had failed, and his and petitioner’s reported adjusted
gross income had fallen from approximately $199,000 in 1995 to
$2,108 in 2001. By the time of his conviction in October 2002
and subsequent incarceration in April 2003, Mr. Barrera was not
working and had no income, and petitioner admitted that Mr.
Barrera was living with her and the children because “he had no
money” and “nowhere to go”. The facts and circumstances of this
case thus establish that petitioner knew or had reason to know
that, at the time she entered into the marital settlement
agreement, Mr. Barrera would not pay the liabilities at issue.
Accordingly, this factor is neutral.
6. Attributable to Nonrequesting Spouse
The balance due on the joint return for taxable year 1998
was attributable to self-employment tax on income earned by Mr.
Barrera from his Schedule C activity as a business consultant.
The balance due on the joint return for taxable year 1999 was
attributable to the 10-percent additional tax on early
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