- 48 -
and Mr. Scott relied on the advice of their attorney
and their independent Certified Public Accountant, Mr.
Hrynik. In addition, MSSTA received Mr. Hrynik's
opinion that it could redeem Mr. Carter's MSSTA stock
for $300,000, and that it would be able to pay its
debts as they became due in the usual course of bus-
iness. Neither MSSTA's attorney nor its accountant
advised MSSTA or either Petitioner concerning any ad-
ditional MSSTA tax liability. AST represented to Mr.
Scott and his attorney that the anticipated MSSTA tax
liability was not more than $10,000. Finally, Peti-
tioners' contentions are buttressed by the fact that
the revenue agent assigned to the audit waived all
penalties against MSSTA.
We shall first consider the positions of the parties with
respect to Mr. Scott. Based on our examination of the entire
record before us, we find that at the closing of the MSSTA
transaction, Mr. Scott, in his capacities as president, director,
and stockholder of MSSTA, knew, and consequently MSSTA knew,
inter alia, that (1) the MSSTA transaction took the form that it
did because Mr. Scott did not want to pay any taxes as a result
of that transaction; (2) the Scotts were not purchasing an ag-
gregate 21-percent stock interest in AST in exchange for the
nominal cash amount of ten cents a share and/or their aggregate
48-percent stock interest in MSSTA; (3) AST was not purchasing
MSSTA's assets for only $300,000, but instead, in substance, was
purchasing those assets for an amount substantially in excess of
$300,000 consisting of cash and a 21-percent stock interest in
AST; (4) the Service could decide not to accept the return posi-
tions that MSSTA and the Scotts intended to take with respect to
the MSSTA transaction (viz., MSSTA would report only the $300,000
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