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Petitioners contend that they relied on their accountant and
were negligent, but not fraudulent, in understating their income.
A taxpayer can avoid liability for fraud by establishing reliance
on an accountant where the accountant was provided with adequate
information from which to prepare the returns. Estate of Temple
v. Commissioner, 67 T.C. 143, 162 (1976); Morris v. Commissioner,
T.C. Memo. 1992-635, affd. without published opinion 15 F.3d 1079
(5th Cir. 1994). Petitioners rely on Compton v. Commissioner,
T.C. Memo. 1983-647, as support for their contention. In
Compton, the taxpayer understated income derived from his logging
business. We determined that the understatements were due to the
negligence of the taxpayer's return preparer. The taxpayer had
provided his accountant with all information necessary to
accurately calculate his tax liability. The accountant, however,
understated the taxpayer's income, as well as the taxpayer's
deductions. When the Internal Revenue Service commenced an audit
of the taxpayer's returns, he cooperated fully. We concluded
that the taxpayer was not liable for the addition to tax for
fraud.
The present case is readily distinguishable from Compton.
The Gilchrists, unlike the taxpayer in Compton, did not give
their return preparer all the information necessary to accurately
calculate their tax liability. Mr. Crim was not informed that
corporate income had been deposited into personal accounts. In
addition, the Gilchrists, unlike the taxpayer in Compton, did not
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