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Peterson during taxable year 1991 were reported on the return and
that that amount totaled $45,000. She claims that she
specifically asked Mr. Peterson whether all embezzled funds were
reported on the return and that Mr. Peterson assured her that the
above-referenced $45,000 figure accounted for all such funds.
Further, petitioner asserts that she inquired at Mr. Peterson's
law office as to whether anyone there knew the actual amount that
Mr. Peterson had embezzled during 1991. Office personnel, she
testified, told her that the estate had received special
treatment and that, as a result of such treatment, and because no
paper trail had been created, the actual amount of Mr. Peterson's
embezzlement could not be determined. Petitioner also claims to
have been told that the estate's file had been forwarded to an
attorney unaffiliated with Mr. Peterson's firm, and that, as a
result, she was unable to pursue the matter further.
Respondent attempts to refute each of these allegations.
Specifically, she argues that, because Mr. Peterson was a known
embezzler and had suffered from a memory-impairing stroke the
prior year, it was unreasonable for petitioner to accept his word
that he had only embezzled $45,000 in 1991 and that all such
embezzled funds were reported on the couple's 1991 return.
Instead, respondent claims, petitioner should have contacted the
attorney who had replaced Mr. Peterson as the estate's attorney
in order to determine the validity of Mr. Peterson's
representation that all embezzled funds were accounted for in the
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