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one of the four IMED executives who were delegated to pursue the
sale negotiations with Warner-Lambert. Henry and the other top
level IMED officers possessed significant amounts of the 1981
options. The potential value and possible tax treatment of the
options to the IMED officers was certain to be a prominent topic
of conversation. We find it difficult to believe that IMED's
chief financial officer would not be privy to this and/or be
oblivious to the concerns of the other officers, who, along with
Henry, ran IMED. Henry may have entered the top echelon of IMED
after Cramer and his nucleus of associates, but he was not an
"outsider" regarding IMED's daily business operations.
Respondent's determination that petitioners were negligent
is sustained. Petitioners' claims of good faith are undermined
by the totality of the circumstances. Based on the testimony
from Hendrickson, Monaghan, and Douglas, the record demonstrates
that Henry was aware of the risks involved in reporting all of
the proceeds from the sale of the 1979 and 1981 stock options as
long-term capital gain. Moreover, Henry did not provide Douglas
with all the information Henry knew about the 1979 or 1981
options. For example, if Douglas had been made aware of the fact
that the value of the 1979 options was not zero, that would
likely have had a profound effect on the accountant’s evaluation
of the proper tax treatment of the option proceeds. Finally, the
fact that Henry referred Douglas to either Hendrickson or
Monaghan if there were any questions regarding IMED's stock
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