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the years at issue and was told not to worry about it.
Petitioner’s basis for requesting relief is that, since she was
told not to worry about the income reported on the Forms 1099-
MISC for 2002 and 2003; i.e., the insurance renewal income, she
was not aware and had no reason to know of the understatements of
tax for the years at issue.
Even if a spouse requesting relief under section 6015 does
not have actual knowledge of the item giving rise to an
understatement, that spouse may, nonetheless, have reason to know
of the understatement. A requesting spouse has reason to know of
an understatement if a “reasonably prudent person with knowledge
of the facts possessed by the person claiming * * * [relief]
should have been alerted to the possibility of a substantial
understatement.” Flynn v. Commissioner, 93 T.C. 355, 365 (1989).
A spouse requesting relief under section 6015 has a duty of
inquiry. Butler v. Commissioner, 114 T.C. 276, 284 (2000).
Respondent argues that petitioner had reason to know that
Mr. Garza received renewal income in 2002 and 2003.
Notwithstanding her lack of a business background, the Court is
not convinced that petitioner’s failure to inquire was
reasonable. Mr. Garza’s unreported renewal income was the only
matter discussed during the 2002 audit examination of taxable
years 1999-2001. A reasonably prudent taxpayer should have been
alerted to the possibility that, despite retiring from AILIC in
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