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information that assisted C&L with petitioners' tax planning
strategy and to claim ignorance of any other information. Cf.
United States v. Jewell, 532 F.2d 697, 700 (9th Cir. 1976)
(defining "willful blindness"); United States v. Aleman, 728 F.2d
492, 494 (11th Cir. 1984).
C&L suggested tax-avoidance strategies, and petitioners
tried to comply with C&L's recommendations, even when petitioners
believed that compliance involved fabricating documents. C&L
failed to advise petitioners fully as to their obligations and
failed to make any effort to obtain the correct facts. These
failures, coupled with C&L's use of the "form" created by the
false documents, amounted to tacit advice by C&L that
petitioners' actions were not only acceptable but desired. C&L's
tacit approval caused petitioners to continue in the practice--
C&L suggested the plan, petitioners responded, and C&L continued
with the next tax planning strategy. The Spanish investors were
sophisticated businessmen, but they relied on C&L to advise them
with respect to the requirements of U.S. law.
We agree that there are many badges of fraud present in
these cases. We conclude, however, that respondent has not
negated the alternative explanation, petitioners' reliance on
C&L, by clear and convincing evidence. Moreover, respondent has
not proven the falsity of the disallowed deductions by clear and
convincing evidence. The additions to tax and penalties for
fraud will not be sustained.
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