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tax return, they had every reason to rely on his professional
acumen.
Respondent points out, however, that Henry was a
sophisticated businessman who functioned in a highly competitive
environment and should not be allowed to claim reliance on his
adviser if he failed to provide the adviser with correct and
complete information. See Pessin v. Commissioner, 59 T.C. 473,
489 (1972). Specifically, in preparing the 1982 returns, Douglas
was not provided with copies of the relevant IMED options.
Douglas stated that he alone determined that the stock
option proceeds were long-term capital gain in petitioners' joint
1982 Federal income tax return. In his testimony, Douglas
discussed various factors that he incorporated in his ultimate
conclusion that the stock option proceeds were capital gain.
Douglas, however, was not sufficiently informed to reach that
conclusion. He knew that there was a chance that respondent
would challenge the tax treatment. Henry told Douglas to ask for
more information from either Monaghan or Hendrickson with respect
to the stock option plan. However, Henry specifically informed
Douglas that long-term capital gain treatment for the stock
option proceeds was warranted.
Douglas admitted that petitioners did not provide him with
certain relevant information such as copies of the 1979 or the
1981 IMED options. Petitioners did not provide an explanation as
to why these particular documents were not produced to their
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