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suggested commercial paper as a method to avoid withholding tax,
and petitioners engaged in circular financing transactions.
On numerous occasions, C&L received information from
petitioners that was contradictory to information that C&L
already knew or that did not fit with the tax plan. When the
information was subsequently changed to fit the tax plan, C&L
never questioned it. In December 1986, C&L received documents
that included a contract for the sale of intangibles from TM
directly to Manver. Later, that contract was replaced by two
contracts that represented a sale of the intangibles from TM to
Gatetown and then from Gatetown to Manver. In C&L's files, there
are notes that indicate the actual ownership of many of the
corporations involved in the various transactions. C&L prepared
petitioners' returns without disclosing the related-party
information. C&L's California office misled or failed to advise
its Florida office of certain material facts. C&L knew that
GCI/SDCI and MCI were operating as separate entities. When C&L
determined that taxes could be avoided, it advised petitioners to
recharacterize the entities to divisions.
C&L apparently put its own pecuniary interest and its desire
to continue working for petitioners over its duty to reasonably
ascertain the true facts and fully to inform petitioners of the
consequences of following C&L's advice. Petitioners provided
information to C&L, albeit not all correct information, and C&L
chose to be selective with the information. C&L chose to use the
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