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301 F.2d 484 (5th Cir. 1962), affg. T.C. Memo. 1959-172. In this
instance, there is clear and convincing evidence that petitioners
did not inform their tax return preparers of the diverted
receipts and misled the preparers about their income, assets, and
the source of deposits into their bank accounts.
Petitioners contend that they were unsophisticated and
reasonably relied on their preparers. We do not accept their
testimony in this regard. These cases are comparable to Estate
of Temple v. Commissioner, supra, and we incorporate the same
analysis here. There the Court stated:
* * * [The taxpayer’s] conduct was intimately
entwined with the inaccurate recording of his business
income. He often took receipt of incoming checks,
endorsed them, sometimes withheld cash, and carried
them to the bank for deposit. This subsequently
resulted in omitted or inaccurate journal entries.
* * * In addition, * * * [the taxpayer] had a
consistent practice of cashing checks, which generated
no deposit slips, and thereby prevented income from
being recorded in the journal.
While a taxpayer’s reliance upon his accountant to
prepare accurate returns may indicate an absence of
fraudulent intent, this is true in the first instance
only if the accountant has been supplied with all the
information necessary to prepare the returns. * * *
[The estate] argues in this regard that * * * [the
preparer] had total access to all of the * * *
[business’] books and records, so that even though the
journal was inaccurate, a thorough professional job of
accounting would have uncovered the inaccuracies. Of
course, the thorough audit conducted by respondent’s
agents did discover many omitted and erroneous entries.
However, we cannot conclude on the basis of the record
before us that * * * [the preparer] was retained to
check with * * * [the business’] customers in order to
find out whether they made payments to * * * [the
business] which were not recorded in the journal or to
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