American Valmar International Ltd., Inc., et al. - Page 27

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            testimony is also clear that he determined the tax treatment of                              
            the American Valmar and Markovski deposits based on what                                     
            Markovski told him about the nature of those deposits.  With                                 
            respect to the American Valmar deposits, Bolonik testified that,                             
            in setting up American Valmar’s books and records, he had                                    
            conversations with Markovski about the nature of the                                         
            corporation’s business and the books and records reflected those                             
            discussions.  With respect to the Markovski deposits, Mr. Bolonik                            
            testified that he believed that those deposits did not constitute                            
            items of gross income during the years received based on                                     
            Markovski’s statements to him that those sums had been earned                                
            before Markovski moved to the United States.  In substantial                                 
            part, petitioners have failed to prove their version of the facts                            
            concerning the American Valmar and Markovski deposits.  Bolonik’s                            
            advice, thus, was faulty, and petitioners can rely on it to                                  
            establish reasonable cause and good faith only if such reliance                              
            was reasonable and they acted in good faith.  Reasonable cause                               
            and good faith may be established by a showing of an honest                                  
            misunderstanding of fact.  Petitioners have failed to convince us                            
            of what actually transpired here.  They have, thus, failed to                                
            convince us that they honestly misunderstood any facts.  We are                              
            not convinced--i.e, petitioners have failed to prove--that there                             
            was reasonable cause for their underpayment and that they acted                              
            in good faith in determining their income tax liabilities with                               
            respect to the American Valmar and Markovski deposits.  We                                   




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