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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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