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4. Knowledge or Reason To Know
The fact that the requesting spouse did not know or have
reason to know when she signed the returns that there was an
understatement of tax or that the taxes would not be paid favors
granting relief. The fact that the requesting spouse knew or had
reason to know when she signed the returns that there was an
understatement of tax or that the taxes would not be paid weighs
against granting relief. In resolving whether in signing a tax
return a requesting spouse had reason to know of the
understatement of tax in the return, we consider whether the
requesting spouse was aware of the circumstances of the
transaction(s) that gave rise to the error(s) in the return.
Jonson v. Commissioner, 118 T.C. at 115; Bokum v. Commissioner,
94 T.C. 126, 145-146 (1990), affd. 992 F.2d 1132 (11th Cir.
1993).
In determining the taxpayer’s knowledge, we may examine
several factors, including: (1) The requesting spouse’s level of
education; (2) the requesting spouse’s involvement in the
family’s financial affairs; (3) the nonrequesting spouse’s
evasiveness and deceit concerning the family’s financial affairs;
and (4) the presence of expenditures that are lavish or unusual
when compared to the requesting spouse’s past standard of living.
See Stevens v. Commissioner, 872 F.2d 1499, 1505 (11th Cir.
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Last modified: November 10, 2007