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We believe that petitioners acted with reasonable cause and
in good faith in their reliance on Arthur Andersen in connection
with the preparation of their returns for the years in issue.
Arthur Andersen, an accounting firm having substantial experience
in the oil and gas industry, qualifies as a competent tax adviser
in the instant case. Moreover, petitioners provided Arthur
Andersen with their schedules and workpapers for use in the
preparation of their Federal corporate income tax returns.
Additionally, Arthur Andersen had access to all of petitioners'
books and records. There is nothing in the record to indicate
that petitioners withheld any relevant information from Arthur
Andersen. Respondent suggests that, because petitioners were
short staffed during the years in issue, petitioners devoted less
time and resources than usual to their return preparation
activities. We disagree. When commitments created by numerous
acquisitions left petitioners without the necessary accounting
staff required to assist in the preparation of their Federal
corporate income tax returns, petitioners engaged a C.P.A. to
prepare certain schedules and workpapers for review by Arthur
Andersen. Accordingly, we believe that petitioners made
significant efforts to assess their proper tax liability.
Consequently, we hold that petitioners are not liable for the
accuracy-related penalties under section 6662(a) for the years in
issue.
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