Terry Duane Beall and Joyce Engel Beall - Page 25

                                       - 25 -                                         

               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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