George Georgiou and Judith Georgiou A.K.A. Judy Georgiou, et al. - Page 40

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            to negligence, but rather a factor to be considered.  First it                                 
            must be established that the reliance was reasonable."  Freytag                                
            v. Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d 1011                                  
            (5th Cir. 1990), affd. 501 U.S. 868 (1991).                                                    
                  Respondent maintains that petitioners may not rely on the                                
            advice of Bernard and Pryor for protection from the penalty.                                   
            Respondent argues that petitioners, Bernard, and Pryor conspired                               
            to prepare and present to the IRS backdated documents and                                      
            accounting entries.  We agree with respondent.                                                 
                  Petitioners "instructed" Pryor and Bernard rather than                                   
            relied on them.  Bernard testified:                                                            
                         If I had to describe myself in connection with all                                
                  of my activities for Mr. Georgiou, if I had to draw the                                  
                  distinction between scrivener and business adviser, I                                    
                  would describe myself as a scrivener.  I would produce                                   
                  documents to reflect agreements that had been reached                                    
                  by the client.                                                                           
            Bernard stated that he had not seen the financial records or tax                               
            returns of petitioners' corporations and that he would                                         
            "absolutely not" describe himself as Georgiou's or Kolonaki's tax                              
            adviser.  Regarding Kolonaki, Bernard testified as follows:                                    
                         Q  Did you feel it was necessary in your role as                                  
                  counsel, business counsel, to know something about the                                   
                  finances of the corporate client?                                                        
                         A  Not only didn't I, because I wasn't giving                                     
                  Mr. Georgiou financial advice, but I felt that if I had                                  
                  inquired about financial information about Kolonaki I                                    
                  would have been rebuffed and it would have damaged my                                    
                  relationship with the client.                                                            

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