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we believe that the prior audits and grand jury investigation
would not cause Ms. Walters to suspect that Mr. Gherman was
embezzling money from the accounts of FIP's clients.
Third, during 1984, Ms. Walters requested that she be
removed from FIP's payroll because she wanted to avoid trouble in
the future with the IRS. Furthermore, Ms. Walters knew that
following the audits and the grand jury investigation, the
accountants who prepared the tax returns for FIP and petitioners
began to take a closer look at large and extraordinary items,
especially expense items, reported on the tax returns and that
after they were prepared, the returns were reviewed by attorneys
who specialized in tax matters before being presented to
petitioners for their signature. We are persuaded that, as far
as Ms. Walters knew, she had taken appropriate action to assure
herself that the returns were proper and correct.
Finally, we do not agree that Ms. Walters blindly accepted
petitioners' tax returns. While she may not have reviewed the
returns in depth, Ms. Walters knew that the returns had been
prepared by a C.P.A. and then reviewed and approved by attorneys
who specialized in tax matters before the returns were given to
petitioners for signature. Furthermore, Ms. Walters sought and
received assurances from Mr. Gherman that the returns were
properly prepared before she signed them. Accordingly, we are
persuaded that Ms. Walters satisfied her duty to inquire as to
the accuracy of the joint tax returns.
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