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tax if she knew every fact necessary to determine the legal
consequences of the income or if such facts are reasonably within
her reach; ignorance of the attendant tax consequences is not a
defense. Mitchell v. Commissioner, 292 F.3d 800, 804-804 (D.C.
Cir. 2002), affg. T.C. Memo. 2000-332; Price v. Commissioner, 887
F.2d 959, 964 (9th Cir. 1989); McCoy v. Commissioner, 57 T.C.
732, 734-735 (1972).
In the instant case, the Court finds that petitioner knew or
had reason to know of the understatements of tax at the time the
returns for 2002 and 2003 were filed. The Court is satisfied
that petitioner was aware that Mr. Garza received renewal income
during the years at issue. Petitioner admitted in her testimony
that she was aware that Mr. Garza received renewal income in 1999
because she discussed with him the receipt of such income when
she received in the mail a Form 1099-MISC, Miscellaneous Income,
from AILIC for that year. Additionally, Mr. Garza’s receipt of
renewal income, as well as the tax consequences arising
therefrom, were the subject of an audit examination conducted by
agents of respondent sometime in 2002 for taxable years 1999-
2001. At trial, when asked whether she participated in the audit
examination, petitioner testified: “Yes, that’s when I got my
education on what was going on.” Moreover, petitioner admitted
on her Form 12510, Questionnaire for Requesting Spouse, that she
questioned Mr. Garza about the renewal income he received during
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