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Here, petitioners argue that they were in a different
position from the Cramer taxpayers in that they properly relied
on the professional evaluation and advice of their independent
certified public accountant, Douglas, when they reported a basis
of zero in the stock options on their 1982 joint income tax
return. Petitioners also contend that they did not know that the
proceeds from the stock options were not long-term capital gain.
Based on these claimed differences, they argue that they were not
negligent.
Under the circumstances here, petitioners' reliance was not
reasonable. We agree with respondent that petitioners were
negligent in reporting the proceeds from the sale of the options
as long-term capital gain on their 1982 return. Their claims of
good faith are not supported by the record.
Petitioners contend that Douglas alone made the decision to
classify the option proceeds as long-term capital gain.
Petitioners further contend that they had no reason to question
Douglas' classification of the option proceeds as long-term
capital gain. Petitioners explain that when Douglas was hired as
their accountant, Henry was informed that Douglas had an
impressive professional background. In addition, petitioners
were pleased with Douglas’ representation in several audits of
prior years. Accordingly, petitioners argue that, at the time
Douglas started work on petitioners' joint 1982 Federal income
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