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In view of petitioners' lack of formal training in tax or
accounting, they argue that they relied on McKenzie for advice in
the preparation of their tax returns to assure compliance with
rules and regulations. In June 1988, before the Corporation's
liquidation, petitioners met with their tax attorney and
McKenzie, who is a certified public accountant. At that time,
petitioners told McKenzie of their intention to "live at 20 The
Point more or less indefinitely." Terry notified McKenzie that
they sold 20 The Point after the sale occurred, and he notified
McKenzie after the agreement to purchase 15 Sandpiper was signed.
This was consistent with petitioners' habit of informing McKenzie
after an event occurred.
In preparing petitioners' tax return, McKenzie testified
that in reaching his opinion that section 1034 applied, he relied
upon Terry for a determination of which residence he should
reflect as their personal residence. More specifically, he
relied on Terry's statement in June 1988 that petitioners were
going to live at 20 The Point more or less indefinitely.
Further, petitioners did not inform McKenzie, and he was unaware,
of petitioners’ use of 20 The Point, of the addresses used by
them on their tax forms, and of other circumstances bearing on
whether and when 20 The Point was their principal residence.
Under the facts and circumstances, we conclude that petitioners
have failed to prove that their reliance on McKenzie was
reasonable and that they acted in good faith.
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