Thomas B. Drummond - Page 50

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               We have found that petitioner was not aware of the errors              
          relating to the disallowed automobile expenses that Mr. McVeigh             
          made in Schedules C of petitioner's 1989, 1990, and 1991 returns            
          relating to Psychological Testing Services and that he could not            
          have detected them by reviewing those returns.                              
               On the record before us, we find that petitioner's reliance            
          on Mr. McVeigh with respect to the claimed disallowed automobile            
          expenses in petitioner's returns for the years at issue was                 
          reasonable and in good faith.  Consequently, we reject respon-              
          dent's determinations imposing the accuracy-related penalty on              
          the portion of the underpayment for each such year that is                  
          attributable to those disallowed expenses.                                  
                    Substantial Understatement of Income Tax                          
                                                                                     
                         Petitioner's Claimed Deductions of Losses                    
                         From His Horse Activity and His Cattle Activity              
               We have found that, based on what petitioner told Mr.                  
          McVeigh about his horse activity and his cattle activity, includ-           
          ing that he intended to buy, train, and sell horses34 and that he           
          had incurred certain expenses for various stables and training              
          centers that Mr. McVeigh believed to be reputable, Mr. McVeigh              
          concurred in petitioner's conclusion, and he and petitioner                 
          jointly decided, that the gross income, expenses, and loss from             


          34  We note that this finding is based on Mr. McVeigh's testimony           
          as to what petitioner told him about his intention with respect             
          to his horse activity.                                                      




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