                        T.C. Memo. 2006-24


                      UNITED STATES TAX COURT



               PHYLLIS E. CAMPBELL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 6772-04.               Filed February 15, 2006.



     Robert E. McKenzie and Kathleen M. Lach, for petitioner.

     Kathleen C. Schlenzig, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     GOEKE, Judge:   Petitioner challenges respondent’s

determination that she is not entitled to relief from joint and

several liability under section 6015(b) or, in the alternative,

under section 6015(f) for the taxable year 1983.1   Petitioner


     1
      Unless otherwise indicated, all section references are to
                                                   (continued...)
                                 - 2 -

seeks relief from respondent’s determination of a joint and

several tax liability (including interest) of $2,884,120.91.       As

explained herein, we find petitioner is entitled to relief under

section 6015(b).

                          FINDINGS OF FACT

       Some of the facts have been stipulated and are so found.

The stipulations of fact are incorporated herein by this

reference. Petitioner resided in Lampe, Missouri, at the time her

petition was filed.    Petitioner has been married to Ronald

Campbell (Mr. Campbell) since 1968.      Petitioner has an

undergraduate degree in sociology and a master’s degree in

special education.    In addition, petitioner obtained a licensed

practical nurse (LPN) certification in 1994.      During the year at

issue, petitioner was primarily a homemaker.      At the present

time, petitioner is employed at Skaggs Community Hospital as an

LPN.

Petitioner’s Relationship With Ronald Campbell

       Petitioner did not participate in and had little knowledge

of Mr. Campbell’s business matters.      Mr. Campbell was a

commodities broker and trader.    During their marriage, petitioner

paid the household expenses from her personal checking account

that Mr. Campbell funded through wire transfers from a


       1
      (...continued)
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                               - 3 -

commodities account in petitioner’s name at Refco, Inc. (Refco),

a trading clearinghouse.   Mr. Campbell stated that he transferred

approximately $100,000 to petitioner’s account every few months.

Petitioner’s Assets and Liabilities

     On or about February 1, 1983, the Campbells purchased a home

in Naperville, Illinois, for $321,000.    On August 16, 1982, Mr.

Campbell had transferred $1 million to petitioner’s personal

account from profits in petitioner’s Refco account by securing a

check from Refco issued to petitioner for that amount.

Petitioner used those funds to purchase the home and several

certificates of deposit.   The house was not subject to a mortgage

loan.   Petitioner and Mr. Campbell resided in the Naperville home

from February 1 through December 31, 1983.    Sometime in 1990, the

Campbells sold one of two lots on which the Naperville home was

located for approximately $165,000.    In 1993, they sold the

remaining lot for approximately $393,000.    In 1990, the Campbells

purchased a home in petitioner’s name in Lampe, Missouri (the

Lampe home), for approximately $181,000.    The Lampe home has

remained an asset exclusively owned by petitioner.    They used

some of the proceeds from the sale of the Naperville property to

purchase the Lampe home.

     As of the end of the taxable year 2000, petitioner had an

individual retirement account with a fair market value of

$35,833.   As of August 14, 2003, there has been no mortgage or
                                - 4 -

other encumbrance on the Lampe home.    As of March 3, 2005, the

Lampe home had an approximate fair market value of $183,000.

Petitioner had a balance of approximately $25,000 in her

retirement account at Skaggs Community Hospital as of the date of

trial.   In addition, petitioner owned a 1993 Ford Explorer at the

time of trial.   Petitioner had no other assets of significant

value.

Petitioner’s Account at Refco

     The commodities trading account in petitioner’s name with

Refco was opened in 1979 under her Social Security number by Mr.

Campbell.   Mr. Campbell directed the trading activity in this

account.    During the taxable year 1983, petitioner had a net gain

of $3,505,382 from trades in her Refco account.    Petitioner did

not have knowledge of this gain.    The account statements showing

the gains and losses in petitioner’s account were addressed to

petitioner and mailed to her home address; however, petitioner

asserts that she did not open them.     Petitioner stated that she

handed over the unopened statements to Mr. Campbell.    Petitioner

maintained one or more commodity trading accounts with Refco

until at least December 31, 1989.

     Petitioner never had any control over the funds in her Refco

account.    An examination of her statements from Refco reveals a

fluctuating balance, evidencing a constant inflow and withdrawal

of funds.   The only access petitioner had to her account was
                                 - 5 -

indirectly through the allowance that Mr. Campbell would deposit

in her bank account in order for her to be able to write the

family checks.   Even when petitioner bought the Naperville home

in 1982, she did so with money that Mr. Campbell gave to her from

the profits in her account, rather than withdrawing the funds

herself.   Petitioner had no knowledge of the trading activities,

nor was she aware of the balance in the account at any given

time.

Mr. Campbell’s Trading Activities

     Mr. Campbell directed trading activities for his own account

and the accounts of others, including one or more accounts owned

by petitioner.   During the taxable year 1983, Mr. Campbell held a

5-percent partnership interest in Refco Foods, Ltd., a business

that bought, resold, and hedged meat products.   Refco Foods,

Ltd., is a distinct entity from Refco, which as previously

discussed is a trading clearinghouse in which Mr. Campbell has no

ownership interest.    At the end of the taxable year 1983, Refco

Foods, Ltd., had a loss of approximately $2.6 million in its

futures spread income account.

     During the same year, Mr. Campbell operated a business

called Refco Foods Too, a meat commodities trading company, as a

sole proprietorship.   Refco Foods Too had net losses of

approximately $600,000 for the taxable year 1983.   In addition,

during the taxable year 1983, Mr. Campbell was the president and
                               - 6 -

sole shareholder of Campco, Inc., a C corporation.   Campco, Inc.,

reported taxable income of $16,005 in its Federal income tax

return for the fiscal year ending August 31, 1983.

     London Metal Exchange Transaction

     Sometime in late 1983, Mr. Campbell had discussions with Tom

Meyers, the CFO of Refco Foods, Ltd., with respect to what has

been described as a London straddle (London straddle).   The

London straddle was conducted through Van Lessen Richardson & Co.

(Van Lessen), a brokerage firm controlled by David Lamb, who was

one of the individuals organizing the London straddle.   Mr.

Campbell stated that he funded the London straddle by

transferring approximately $2.6 million from petitioner’s Refco

trading account to the Van Lessen account in 1983.   Mr. Campbell

explained in his testimony that he took roughly $2.6 million from

the trading account in his wife’s name at Refco as part of the

scheme to generate offsetting losses and he subsequently used

those funds to satisfy the losses in Refco Foods Too and Refco

Foods, Ltd.   Petitioner was not aware that Mr. Campbell withdrew

the $2.6 million.   Nor did Mr. Campbell consult her about making

the withdrawal.   The funds were never returned to the account in

petitioner’s name and never benefited petitioner.

     The purported losses generated by the transactions on the

London straddle were fictitious.   During preparation of the

Campbells’ 1983 joint income tax return, Jack Esses, a tax return
                               - 7 -

preparer with the firm of Marcus, Esses, & Associates, Ltd.,

informed Mr. Campbell that the $2,591,028 loss from the London

straddle would not be allowed by the Internal Revenue Service

(IRS).   Nevertheless, Mr. Campbell instructed that the loss be

included in the 1983 joint Federal income tax return.     Mr.

Campbell did not inform petitioner about Mr. Esses’s warning.

Mr. Campbell also never told petitioner about the London

straddle, nor that he made any kind of investment with the money

from her Refco account.

     After the London straddle in 1983, Mr. Campbell was not able

to make any money on the commodities market.   Mr. Campbell

explained in his testimony that the market substantially changed,

and he was unable to make any money from trading.    After 1983,

the Campbells moved to a rural area of Missouri.    Mr. Campbell’s

financial situation did not substantially improve until recently.

1983 Tax Return

     The Campbells filed a joint income tax return for the 1983

taxable year.   Mr. Esses prepared that return.   The Campbells

reported adjusted gross income of $48,865 and a negative taxable

income of $57,956.   Further, the Campbells reported an

overpayment of $314,229.   As a result of the London straddle,

petitioner and Mr. Campbell reported a net loss of $2,591,028

from the Van Lessen account on Schedule D, Capital Gains and

Losses; Form 6781, Gains and Losses from Regulated Futures
                               - 8 -

Contracts and Straddle Positions; and Statement 6, Regulated

Futures Contract Marked to Market, which were all attached to the

1983 joint Federal income tax return.

     Petitioner signed the 1983 joint income tax return.

Petitioner did not review the 1983 income tax return before

signing it.   Further, petitioner did not have any discussions

with, or make any inquiries of, Mr. Campbell or Mr. Esses about

the 1983 tax return before or at the time of signing it.

Audit of 1983 Return

     In 1986, the Campbells’ joint Federal 1983 joint tax return

was chosen for audit.   The audit of the 1983 joint tax return was

the result of a criminal complaint filed by the U.S. District

Attorney for the Central District of California against the

individuals who organized the London straddle.   The complaint

alleged that the six individuals prearranged commodity

transactions using the Van Lessen brokerage firm.   The Federal

Bureau of Investigation uncovered evidence of a prearranged

commodity transaction by Mr. Campbell that resulted in a loss of

$2,684,000 and a corresponding gain of $2,645,000 for Refco

Foods, Ltd.   The $2.684 million loss generated the net loss of

$2,591,028 from the Van Lessen account claimed on the 1983 income

tax return.
                                - 9 -

Appeals Process

     The Campbells received a proposed notice of deficiency (30-

day letter) dated March 5, 1990, proposing a deficiency in income

tax for the taxable year 1983 of $2,371,975 and additions to tax

aggregating $1,886,986.   The Campbells timely protested this

proposed deficiency, and the case was sent to the Appeals Office.

On September 25, 1998, the Campbells executed Form 870-AD, Waiver

of Restrictions on Assessment and Collection of Deficiency in Tax

and Acceptance of Overassessment, for the 1983 tax year (the 1983

settlement).   In the 1983 settlement, the Campbells consented to

the assessment and collection of a $598,826 deficiency (not

including interest).   Further, the Campbells conceded that

$435,401 of the deficiency resulted from a tax-motivated

transaction.   On December 29, 1998, the Campbells received a

notice of assessment of $2,804,014.43.   Under the Form 870-AD,

petitioner was entitled to file a claim for innocent spouse

relief under section 6015.    In May 2002, Mr. Campbell submitted

an offer-in-compromise with respect to the 1983 tax liability of

$100,000, which respondent eventually accepted on the grounds of

doubt as to collectibility.   The Campbells paid the $100,000 by

stripping their retirement accounts and borrowing money from

petitioner’s mother.

     On or around April 14, 1999, petitioner submitted a Form

8857, Request for Innocent Spouse Relief (And Separation of
                                - 10 -

Liability and Equitable Relief), requesting relief pursuant to

section 6015(b), (c), or (f) for the taxable year 1983.    On

August 9, 2000, respondent sent petitioner an initial letter

(Letter 3277) notifying her that she was not entitled to relief

under section 6015(b) for the taxable year 1983.    On September

22, 2000, petitioner sent a protest letter to respondent in

response to respondent’s notification letter outlining the

reasons that petitioner believed respondent’s determination was

incorrect.

     Petitioner submitted a Form 433-A, Collection Information

Statement for Wage-Earners and Self-Employed Individuals, to

respondent on September 12, 2003.    In petitioner’s Form 433-A,

she reported assets totaling $197,155 (including the Lampe home

valued at $183,000).   Petitioner had no outstanding liabilities

and also reported gross monthly earnings of $2,061 and living

expenses of $1,674.    Mr. Campbell also reported his assets and

liabilities in the Form 433-A.

Final Notice of Determination

     On January 23, 2004, the Appeals Office sent to petitioner a

Notice of Determination Concerning Your Request for Relief From

Joint and Several Liability Under Section 6015 (notice of

determination) denying petitioner’s request for relief from joint

and several liability.    The notice of determination denied relief

only under section 6015(f) and did not mention section 6015(b).
                               - 11 -

However, the report by the Appeals officer accompanying the

notice of determination denied petitioner relief under section

6015(b) because (1) petitioner had actual or constructive

knowledge of all or part of the understatement, and (2) the

Appeals officer determined that it was not inequitable to hold

petitioner liable for the deficiency.    The notice of

determination stated that petitioner was not entitled to relief

from joint and several liability for the taxable year 1983 under

section 6015(f).    In making this determination, the Appeals

officer evaluated petitioner’s request under Rev. Proc. 2003-61,

2003-2 C.B. 296.2

     On April 22, 2004, petitioner timely filed a petition with

this Court under section 6015(e) seeking review of respondent's

determination.




     2
      Rev. Proc. 2003-61, 2003-2 C.B. 296, is effective only for
requests for relief filed on or after Nov. 1, 2003, or requests
for relief pending on Nov. 1, 2003, for which no preliminary
determination letter had been issued as of Nov. 1, 2003. The
request for relief in this case was filed on Apr. 14, 1999, and a
preliminary determination letter denying petitioner relief was
issued on Aug. 9, 2000. Therefore, Rev. Proc. 2000-15, 2000-1
C.B. 447, should have been used to consider this case. There is
no basis to conclude, however, that the Appeals officer would
have reached a different conclusion under Rev. Proc. 2000-15,
supra.
                                - 12 -

                                OPINION

     Generally, married taxpayers may elect to file a joint

Federal income tax return.    Sec. 6013(a).     Section 6013(d)(3)

provides that taxpayers filing a joint return are jointly and

severally liable for all taxes due.       However, under certain

circumstances, section 6015 provides relief to taxpayers seeking

to be relieved from joint and several liability.       Section 6015

offers three types of relief:    (1) Full or partial relief under

section 6015(b); (2) proportionate relief under section 6015(c);

and (3) equitable relief under section 6015(f).       Petitioner seeks

relief from joint and several liability under section 6015(b), or

in the alternative, section 6015(f).       We have jurisdiction to

determine whether equitable relief is available to petitioner for

the deficiency in tax shown on her joint return.       See Ewing v.

Commissioner, 118 T.C. 494, 502 (2002).

     The taxpayer who files a petition under section 6015(e)

generally bears the burden of proof with certain exceptions not

applicable in this case.     Rule 142(a); Alt v. Commissioner, 119

T.C. 306, 311 (2002), affd. 101 Fed. Appx. 34 (6th Cir. 2004);

Jonson v. Commissioner, 118 T.C. 106, 113 (2002), affd. 353 F.3d

1181 (10th Cir. 2003); Baumann v. Commissioner, T.C. Memo.

2005-31.   However, the burden of proof issue does not influence

the outcome of this case because our decision is based on the

preponderance of the evidence.    See Blodgett v. Commissioner, 394
                                - 13 -

F.3d 1030, 1035 (8th Cir. 2005), affg. T.C. Memo. 2003-212.

Petitioner’s Claim for Innocent Spouse Relief:       Section 6015(b)

     Although the final notice of determination did not

specifically mention section 6015(b), we believe that it was

respondent’s intent, as reflected in the report of the Appeals

officer accompanying the notice, to deny relief under section

6015(b) as well as section 6015(f).       See Aranda v. Commissioner,

432 F.3d 1140, 1144 (10th Cir. 2005) (“We are not concerned with

legalities, but with intent.”), affg. T.C. Memo. 2003-306.      We

believe that the omission in the final notice of determination

was a result of careless drafting.       Therefore, we review

respondent’s determination under section 6015(b) and (f).3      To

qualify for relief from joint and several liability under section

6015(b), a taxpayer must establish:

             (A) a joint return has been made for a taxable
     year;

          (B) on such return there is an understatement of
     tax attributable to erroneous items of 1 individual
     filing the joint return;

          (C) the other individual filing the joint return
     establishes that in signing the return he or she did
     not know, and had no reason to know, that there was
     such understatement;


     3
      Petitioner does not argue that she suffered any prejudice
as a result of this omission. The petition seeks this Court’s
review under sec. 6015(b) and (f), and respondent does not
contest such review. However, since we have decided petitioner
is entitled to relief under sec. 6015(b), it is unnecessary for
us to analyze whether petitioner is entitled to relief under sec.
6015(f).
                              - 14 -


          (D) taking into account all the facts and
     circumstances, it is inequitable to hold the other
     individual liable for the deficiency in tax for such
     taxable year attributable to such understatement; and

          (E) the other individual elects * * * the benefits
     of this subsection not later than the date which is 2
     years after the date the Secretary has begun collection
     activities with respect to the individual making the
     election * * *.

Because these requirements are stated in the conjunctive, a

requesting spouse must satisfy each requirement to qualify for

relief from joint and several liability under section 6015(b).

Alt v. Commissioner, supra at 313.     Respondent concedes that

petitioner meets the three requirements of subparagraphs (A),

(B), and (E).   Thus, we shall address only the application of

section 6015(b)(1)(C) and (D).

     1.   Section 6015(b)(1)(C):   Know or Reason To Know

     A spouse seeking relief under section 6015(b) must not have

known or had reason to know at the time of signing a joint return

that there was an understatement of tax on the return. Sec.

6015(b)(1).   The general rule in an omission of income case is

that the relief-seeking spouse knew or had reason to know of an

understatement of tax if she knew of the transaction that gave

rise to the understatement.   Erdahl v. Commissioner, 930 F.2d

585, 589 (8th Cir. 1991), revg. T.C. Memo. 1990-101; Jonson v.

Commissioner, supra at 115.   However, in deduction cases, the

Court of Appeals for the Eighth Circuit has adopted a different
                               - 15 -

standard, following Price v. Commissioner, 887 F.2d 959 (9th Cir.

1989).   Erdahl v. Commissioner, supra at 589.

     Under this standard, the Court inquires whether a spouse has

reason to know if “‘a reasonably prudent taxpayer under the

circumstances of the spouse at the time of signing the return

could be expected to know that the tax liability stated was

erroneous or that further investigation was warranted.’”     Id. at

590 (quoting Stevens v. Commissioner, 872 F.2d 1499, 1505 (11th

Cir. 1989), affg. T.C. Memo. 1988-63).   The more the

relief-seeking spouse knows about a transaction, “‘the more

likely it is that she will know or have reason to know that the

deduction arising from that transaction may not be valid.’”       Id.

at 590 n.6 (quoting Price v. Commissioner, supra at 963 n.9).

The duty to inquire may arise when the relief-seeking spouse has

notice that a particular deduction could result in a substantial

understatement.   Id.   The failure to inquire “‘may result in

constructive knowledge of the understatement’”.     Id. at 590

(quoting Price v. Commissioner, supra at 965).     The factors

considered in deciding whether the relief-seeking spouse had a

reason to know or a duty to inquire include:     “‘the spouse's

level of education, [her] involvement in family financial

affairs, the evasiveness or deceit of the culpable spouse, and

any unusual or lavish expenditures inconsistent with the family's

ordinary standard of living.’”    Id. at 591 (quoting Guth v.
                               - 16 -

Commissioner, 897 F.2d 441, 444 (9th Cir. 1990), affg. T.C. Memo.

1987-522).

     In applying these factors, we note that petitioner’s

education did not reflect a substantial background in tax or

financial matters.   Petitioner’s role in the family finances was

largely limited to paying the family expenses.    Petitioner

received money to pay those expenses from Mr. Campbell, who

deposited “$100,000 or so” from his trading profits every few

months.

     Even though petitioner was the technical owner of the Refco

account that generated large profits in 1983, we find that she

was only a nominee and had no control over the funds in the

account.   Petitioner’s only access to the account was from the

allowance she received from Mr. Campbell that he deposited in her

personal bank account.    Petitioner stated that she never asked

him to deposit any money.    Petitioner was aware that she received

a check issued to her in the amount of $1 million in 1982.     Part

of the $1 million was used to purchase the family home in

Naperville, Illinois.    However, Mr. Campbell explained in his

testimony that he took the money out of petitioner’s account to

buy the home.   Petitioner had no involvement in Mr. Campbell’s

trading activities or in particular the London straddle.    Mr.
                               - 17 -

Campbell never discussed the details of his trading activities

with petitioner.

     Further, the totality of the circumstances indicates that

Mr. Campbell was evasive about the family finances.    Although the

financial statements from petitioner’s Refco account were mailed

directly to her home address, Mr. Campbell had complete control

over the cashflow into and out of her account.    He treated the

funds in petitioner’s Refco account as available for use in

offsetting losses in his other trading activities.    Mr. Campbell

did not consult her when he withdrew $2.6 million from her Refco

account to invest in the London straddle.   In addition, Mr.

Campbell failed to inform petitioner that their accountant warned

him that the loss resulting from the London straddle would be

disallowed.   We find that Mr. Campbell’s act of depriving

petitioner of the benefit of the money earned in her account and

using it to finance a tax-motivated transaction without informing

her amounts to evasive conduct.

     We next address the issue of whether there is evidence of

any substantial unexplained improvement in the family’s standard

of living.    Petitioner did not benefit from the underreported

income.   The money invested into the London straddle from

petitioner’s account was never returned to her.    There is

evidence that the Campbells’ lifestyle began to deteriorate in

1983, and it continued to do so over the next decade.    Because of
                                - 18 -

Mr. Campbell’s subsequent difficulties in the futures market, the

Campbells were compelled to move from an affluent area of the

Chicago suburbs to a rural area in Missouri, substantially

downgrading their standard of living.    Petitioner was forced to

strip her retirement account and borrow money from her mother to

pay for her husband’s $100,000 settlement with the IRS.    All of

these factors point to the conclusion that the Campbells’

standard of living deteriorated, rather than improved, after the

London straddle.

     Taking all the facts and circumstances into consideration,

we hold that petitioner did not have actual knowledge of the

London straddle.   Given this holding, we must decide whether a

reasonably prudent taxpayer in petitioner’s circumstances had

reason to know that the deduction was false or a duty to inquire

about the deduction on the return.

     We conclude that petitioner did not have reason to know

about the false deduction.   Petitioner has established that she

had no knowledge of the underlying transaction that gave rise to

the deficiency.    She was not involved in Mr. Campbell’s business

affairs, she did not know about the London straddle, and she did

not know that Mr. Campbell financed the London straddle with

money taken from her account.    We believe that petitioner’s
                              - 19 -

status as a nominee with no control over the funds in the account

dissociates her from the London straddle.

     As stated previously, petitioner did not derive a

significant benefit from the gains in her account.    Most of

petitioner’s $3.5 million gain in 1983 was used by Mr. Campbell

to offset the losses he sustained in Refco Foods Too.    The money

invested in the London straddle was never returned to petitioner.

As a result of the London straddle transactions, petitioner lost

access to $2.6 million in her Refco account, and there is no

evidence that petitioner benefited from the $314,000 tax refund

the Campbells received from their 1983 taxes.

      Further, the London straddle was a series of sophisticated

transactions that looked legitimate on paper.    A reasonable

person with petitioner’s educational background, devoid of any

specific knowledge in options trading, could not be expected to

discover that the trades were fictitious.   It took a complex

Federal investigation to figure out that the trades were not

legitimate.   As the Court of Appeals for the Second Circuit

commented when it considered the status of a spouse whose husband

invested in a transaction designed as an income tax shelter:

“‘[courts] recognize that in the bewildering world of tax shelter

deductions, few experts, let alone laypersons, easily discern the

difference between a fraudulent scheme and an exceptionally

advantageous legal loophole in the tax code.’”    Resser v.
                              - 20 -

Commissioner, 74 F.3d 1528, 1537 (7th Cir. 1996) (quoting

Friedman v. Commissioner, 53 F.3d 523, 525 (2d Cir. 1995), affg.

in part and revg. in part T.C. Memo. 1993-549), revg. and

remanding T.C. Memo. 1994-241.   Therefore, petitioner had no

reason to suspect that the losses associated with the London

straddle were fictitious.

     Respondent argues that petitioner had a duty to inquire.

First, respondent implies that the large deduction on the return

should have caused petitioner to inquire as to the source of the

deduction.   Citing Hayman v. Commissioner, 992 F.2d 1256, 1262

(2d Cir. 1993), affg. T.C. Memo. 1992-228, respondent asserts

that “it is well established that a spouse cannot be relieved of

liability by turning a blind eye to dramatically large deductions

fully disclosed on the returns which would put the spouse on

notice that further inquiry would be needed.”

     In the Court of Appeals for the Eighth Circuit, the court to

which this case is appealable, the presence of large deductions,

standing alone, is not sufficient to trigger a duty of inquiry;

it is a factor that may be considered in the totality of the

circumstances.4   See Erdahl v. Commissioner, 930 F.2d at 591.

Therefore, we may not impose a duty to inquire based solely on



     4
      We are bound by the Court of Appeals for the Eighth
Circuit’s view because of the Golsen rule. See Golsen v.
Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.
1971).
                               - 21 -

the large deductions contained in the return.    The return was

prepared by a professional C.P.A., and petitioner had no reason

to question its correctness.    See Price v. Commissioner, 887 F.2d

at 963; Shea v. Commissioner, 780 F.2d 561, 566 (6th Cir. 1986),

affg. in part and revg. in part T.C. Memo. 1984-310; Padgett v.

Commissioner, T.C. Memo. 1987-130 (noting the complexity of the

tax information and concluding that neither the spouse nor “any

reasonable person under her circumstances” could have analyzed

the transactions without “a sophistication in tax return

preparation which she did not have * * * and should not be

expected to have”).   Further, petitioner has no background in

options trading.   Even if she had reviewed the return, a large

trading loss would not have raised a red flag because the nature

of her husband’s option trading business was to lose and gain

millions of dollars at a time.

     Respondent argues that petitioner had a duty to inquire

because the Campbells paid no tax for 1983 and received a refund

of $314,229.   We disagree.   Because of the complexity of the

transactions at issue and the fact that Mr. Campbell took

petitioner’s money without her knowledge, we would not expect her

to realize that Mr. Campbell was taking aggressive tax losses

against the gains in her account.    See Resser v. Commissioner,

supra at 1538 (noting that “traders in highly volatile

instruments [could] expect to have large realized gains or losses
                               - 22 -

from year to year, and thus experience some years with large

taxes or others with no tax”).

     Accordingly, we hold that petitioner did not have reason to

know that the London straddle deduction was illegitimate,

nor did she have a duty to inquire into the presence of the

deduction on the 1983 income tax return.

     2.   Section 6015(b)(1)(D):   Inequity

     We take into account all the facts and circumstances in

deciding whether it is inequitable to hold the relief-seeking

spouse liable for a deficiency.    Sec. 6015(b)(1)(D).   Because

this requirement is similar to the requirement of former section

6013(e)(1)(D), cases interpreting that former section such as

Erdahl v. Commissioner, 930 F.2d 585 (8th Cir. 1991), remain

instructive to our analysis.     Butler v. Commissioner, 114 T.C.

276, 283 (2000).    The material factors most often cited and

considered are whether there has been a significant benefit to

the spouse claiming relief and whether the failure to report the

correct tax liability on the joint tax return results from

concealment, overreaching, or any other wrongdoing on the part of

the other spouse.    Alt v. Commissioner, 119 T.C. at 314; Jonson

v. Commissioner, 118 T.C. at 119.    Normal support is not

considered a significant benefit.     Jonson v. Commissioner, supra

at 114.
                              - 23 -

     We have already stated why we believe petitioner did not

benefit from the London straddle.   She lost access to $2.6

million in her account, and she never saw that money again.      As

we have noted, the Campbells’ lifestyle significantly declined

after 1983, and they were forced to move because of Mr.

Campbell’s misfortunes in the options trading business.

     Further, we believe imposing a tax liability of more than

$2.8 million as a result of a disallowed transaction of which

petitioner had no actual or constructive knowledge would be

extremely inequitable.   Despite Mr. Campbell’s recent success in

his trading, we believe that petitioner would suffer severe

economic hardship if she faced such a liability.    She is in her

sixties with a limited number of working years.    She has only a

small retirement account, her home, and a 1993 Ford explorer.

     Respondent argues that it is not inequitable to hold

petitioner solely liable for the deficiency because the $3.5

million sheltered by the London straddle was attributable to her.

Respondent further suggests that petitioner misled him during the

Appeals process because she did not explicitly tell him that the

account generating the gain sheltered by the London straddle

deduction belonged to her.   We disagree.

     We have found that petitioner’s involvement in the Refco

account was in her capacity as a nominee only.    Mr. Campbell

stated that his friends at Refco opened the account for her.
                                - 24 -

Further, petitioner has credibly established that she was not

involved in the trading associated with the account, nor did she

have control of any of the funds in her account.     We therefore do

not find her nominal ownership significant in any aspect of this

case.     Perhaps petitioner could have been more forthcoming, but

petitioner did not mislead respondent and correctly emphasized

that it was Mr. Campbell’s trading activities that generated the

claimed loss from the London straddle.

     Accordingly, we find that it would be inequitable to hold

petitioner liable for the deficiency in this case.

Conclusion

        Petitioner is entitled to relief under section 6015(b) since

the preponderance of the evidence indicates that she satisfied

the requirements therein.

        To reflect the foregoing,


                                                Decision will be

                                           entered for petitioner.
