John W. Madden, Jr., et al. - Page 35

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          Respondent must carry the burden of proving by clear and                    
          convincing evidence that the foundation managers participated               
          knowingly in the transaction.  Sec. 7454(b); Rule 142(c).                   
               The foundation managers have conceded that each of these               
          payments constitutes self-dealing under section 4941(a)(1).                 
          However, respondent must still prove that the foundation managers           
          knew the act was an act of self-dealing.  Also, the participation           
          by the foundation managers must be willful and not due to                   
          reasonable cause.                                                           
               As noted supra, the Company provided accounting services to            
          the Museum.  Two invoices relating to artwork repairs were                  
          received by the accounting department of the Company.  The                  
          accounting personnel, assuming that the work had been performed             
          on artwork owned by the Museum, made payments of $2,304 and                 
          $1,343 by checks drawn upon the Museum's bank account.  In fact,            
          the artwork belonged to petitioner, and the payments should have            
          been made from petitioner's personal account.                               
               Far from having actual knowledge of sufficient facts about             
          the two transactions, the evidence indicates that the foundation            
          managers lacked any knowledge concerning these transactions.                
          Immediately upon learning of the payments a few days after they             
          were made, petitioner's daughter corrected both of the transac-             
          tions, and petitioner reimbursed the Museum for the expense.                
          Under these circumstances, we conclude respondent erred in                  






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