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Respondent cites numerous badges of fraud, such as the
creation and backdating of documents, false statements in
documents, the use of nominees, and the failure to disclose
related-party information to the IRS. The facts indicate, and we
have concluded in previous portions of this opinion, that
petitioners backdated and created documents, put false
information in documents, used nominees to sign documents, and
presented the false documents to the IRS. However, the presence
of badges of fraud will not automatically negate an alternative
explanation for petitioners' actions. Ishijima v. Commissioner,
T.C. Memo. 1994-353; Klein v. Commissioner, supra.
Petitioners argue that they are not liable for additions to
tax and penalties for fraud or negligence because they reasonably
and in good faith followed the advice of C&L and other
professionals. In their brief, petitioners state "they had no
reason to believe that the advice they received was incorrect,
nor did they have the knowledge or experience to second-guess
that advice" (citing United States v. Boyle, 469 U.S. 241, 251
(1985)).
Respondent argues that petitioners were sophisticated
businessmen who were able to function in a highly competitive
environment, and, therefore, they cannot claim reliance on their
advisers, particularly if petitioners failed to provide the
advisers with correct and complete information. See Pessin v.
Commissioner, 59 T.C. 473, 489 (1972). Additionally, respondent
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