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Based on his discussions with petitioner's advisers, Eberl
reasonably believed that compensation equal to 20-25 percent of
petitioner's gross receipts would be reasonable. Lehrner signed
petitioner's tax returns for the years in issue, which suggests
that Eberl believed Lehrner thought Eberl's compensation was
reasonable. See Bokum v. Commissioner, 94 T.C. 126, 148 (1990)
(accountant's failure to sign the tax return should have put the
taxpayer on notice that he was not backing the advice embodied in
the return). We hold that petitioner's reliance was reasonable
cause for deducting the compensation it paid to Eberl.5
To reflect the foregoing and concessions,
Decision will be entered
under Rule 155.
5 Also, petitioner is not liable for the substantial
understatement penalty for fiscal year 1992 because it adequately
disclosed the facts relating to Eberl's compensation on its 1992
return. Sec. 6662(d)(2)(B)(ii). Rev. Proc. 92-23, 1992-1 C.B.
737, sec. 4(b)(4), 1992-1 C.B. 738, provides that, for purposes
of reducing the understatement of income tax under sec. 6662(d),
additional disclosure of facts relating to an issue involving
reasonable compensation is unnecessary, if the Form 1120,
Schedule E, Compensation of Officers, has been properly
completed. Petitioner included a properly completed Schedule E
concerning Eberl's compensation in its 1992 return.
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