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brought them to Mr. Strong to prepare the tax returns. Mrs.
Haymond did not have possession of InTex's financial records, nor
did she review them.
In preparing the tax returns for the taxable year 1990, Mr.
Haymond and Mr. Strong discussed the sale of the stock. Mr.
Strong requested all documentation related to the stock. Mr.
Haymond provided Mr. Strong with a copy of the resolution, among
other items. Mr. Strong knew that the commission had not been
paid.
Mr. Haymond did not instruct Mr. Strong as to the treatment
of the commission. Mr. Strong "assumed that it was additional
basis because it was a commission paid [sic] on the--on the
stock, on the sale [sic] of the stock." He had understood from
reading the resolution that Mr. Haymond was "entitled to" a
commission, and he assumed the commission would be paid in the
near future. From InTex's books, Mr. Strong believed InTex was a
going concern and would have the cash to pay the commission. He
analogized the commission owed to a note given for borrowed funds
to purchase property. Based on this reasoning, Mr. Strong
included the commission in the basis of the stock.
Once Mr. Strong had prepared both InTex's and petitioners'
returns, Mr. Haymond and Mr. Strong met to review those returns;
Mrs. Haymond was not present. They discussed each item on
InTex's Schedule D, including the amount shown as the basis of
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