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foundations. Clearly, the foundation managers were aware of the
potential problems with paying fees to GMC, as prior to the
hiring of Dr. Manning, GMC had simply rendered the services for
free. We conclude the foundation managers did not exercise
ordinary prudence by relying on the advice of Dr. Manning and not
seeking the advice of counsel regarding these payments. Accord-
ingly, we hold that the foundation managers are liable for the
foundation manager excise tax under section 4941(a)(2) for
payments made by the Museum to GMC.
Issue 5. Excise Tax on Other Payments Made by the Museum
Respondent determined that the foundation managers are
liable for the foundation manager excise tax under section
4941(a)(2) for two payments made by the Museum that benefited
petitioner and a third payment by the Museum that benefited the
Company. Specifically, the two payments which benefited
petitioner, in the amounts of $2,304 and $1,343, were made by the
Museum for work done to petitioner's artwork. A third payment,
in the amount of $3,000, related to a financial obligation of the
Company which was actually paid by the Museum. As discussed
supra, a foundation manager excise tax under section 4941(a)(2)
may be imposed where (1) a tax should be imposed under section
4941(a)(1), (2) the participating foundation manager knows that
the act is an act of self-dealing, and (3) the participation by
the foundation manager is willful and is not due to reasonable
cause. Sec. 53.4941(a)-1(b)(1), Foundation Excise Tax Regs.
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