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done. Wayne Catalano, a contractor who completed some of the
improvements to the home, informed respondent that petitioner was
present at the home when the first meeting was conducted
regarding the improvements. He informed respondent that
petitioner was aware of what was going on. Petitioner had
delegated the authority to Paige to handle the transaction.
Petitioners contended throughout the investigation that they
were unaware PCCL had paid the expenses for the improvements to
the home. However, petitioners were aware they had not paid the
home improvement expenses themselves. In addition, petitioners'
and PCCL's attorney informed respondent by letter that
petitioners were aware of PCCL's having paid the home improvement
expenses but they were not privy to the amounts.
Based on this information, the information provided to
respondent regarding Dorrial, Inc., and the information provided
to respondent regarding PCCL, we conclude respondent had a basis
in fact and law for determining petitioners and PCCL were liable
for penalties for fraud under section 6663. See Whitesell v.
Commissioner, 90 T.C. 702 (1988); Reinhardt v. Commissioner, T.C.
Memo. 1995-82.
2. Petitioners' Arguments
Petitioners argue that the resulting settlement of the
deficiencies to amounts that were minimal in comparison to the
amounts contained in the notices of deficiency, and the
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