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that it received directly from AST as the amount realized from
the sale of MSSTA's assets, and the Scotts would not report any
income since there were no liquidating distributions to them by
MSSTA) because the Scotts would be paying only a nominal cash
amount for a 21-percent stock interest in AST and would not be
reporting any income attributable to liquidating distributions by
MSSTA to them; and (5) MSSTA's tax liability would be about
$10,000, and the Scotts would not owe any tax as a result of the
MSSTA transaction only if the Service accepted those return po-
sitions of MSSTA and the Scotts. At the closing of the MSSTA
transaction, Mr. Scott, in his capacities as president, director,
and stockholder of MSSTA, was bound to know, and consequently
MSSTA was bound to know, that MSSTA would owe tax substantially
in excess of $10,000 on the consideration, which was substan-
tially in excess of $300,000, that he and MSSTA knew AST paid to
purchase MSSTA's assets.
On the record presented, we reject petitioners' contentions
regarding Mr. Scott's reliance on the advice of AST that MSSTA's
tax liability would not exceed $10,000 as a result of the MSSTA
transaction and that MSSTA and Mr. Scott did not know that "there
was an unpaid MSSTA tax liability arising from" that transaction.
In this connection, we found Mr. Hall to be a credible witness at
trial. In contrast, based on our observation of Mr. Scott's de-
meanor during his testimony, we generally did not find him to be
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