- 13 - [Petitioners contend] that * * * [they], being unversed in matters of accounting, relied totally upon * * * [Reed] to insure the accuracy of * * * [their] records and prepare * * * [their] tax returns. * * * [Petitioners] further contend that the resultant understatements are not such as would cause * * * [petitioners] to be aware that * * * [their] income was underreported. We cannot agree with either contention. At the outset we are not impressed with * * * [petitioners'] attempt to characterize * * * [themselves] as * * * unknowledgeable * * * [businesspeople]. * * * the record shows that * * * [the Rooses had their] fingers on the pulse of the financial affairs of * * * [Roose Drug Store]. * * * [Petitioners'] conduct was intimately entwined with the inaccurate recording of * * * [their] business income. * * * While a taxpayer's reliance upon his accountant to prepare accurate returns may indicate an absence of fraudulent intent, John Marinzulich [v. Commissioner], 31 T.C. 487, 490 (1958), this is true in the first instance only if the accountant has been supplied with all the information necessary to prepare the returns. Petitioner[s] [argue] in this regard that * * * [Reed] had total access to all of * * * [petitioners'] books and records, so that even though the * * * [Drug Topics book] was inaccurate, a thorough professional job of accounting would have uncovered the inaccuracies. Of course the thorough audit by respondent's agents did discover many omitted and erroneous entries. However, we cannot conclude on the basis of the record before us that * * * [Reed] was retained to check with * * * [petitioners'] customers in order to find out whether they made payments to * * * [petitioners] which were not recorded in the * * * [Drug Topics book] or to otherwise doublecheck the * * * [Drug Topics book] entries made by * * * [Mrs. Roose]. The evidence points to the contrary. * * * [Id. at 162-163; fn. ref. omitted.] Considering the entire record, we conclude that respondent has proven by clear and convincing evidence that the entire amount of the underpayments of tax on petitioners' returns forPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011