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their assets and adopted the trust scheme. The Martins never
advised the Muhichs about the scheme before the Muhichs entered
into it. The Muhichs had all the trusts' returns for the year of
inception (1994) prepared by Savino in an attempt to keep the
existence of the trusts from the Martins. Although the Martins
did prepare the 1995 returns for the trusts, they did so
reluctantly and only after informing petitioner of their concern
as to the trusts' legitimacy.
Nor are we persuaded that the Muhichs reasonably relied upon
a qualified expert in the form of Bartoli. Bartoli's bias was
obvious, and his ability to benefit financially by luring
individuals into the scheme should have sent up a red flag.
Petitioner is an experienced businessman who should have been
suspicious of Bartoli's claims. Further, the record contains no
evidence as to Bartoli's qualifications or expertise; he was
noticeably absent from the trial, and petitioner was unable to
locate him. The only information the Muhichs provided Bartoli
was a list of assets and a questionnaire wherein they documented
their desire to avoid taxes. We hold the Muhichs are liable for
the accuracy-related penalties for negligence as determined by
respondent.
Midwest
Respondent determined that Midwest is liable for the
accuracy-related penalty under section 6662(a) and (b)(2) for all
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