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petitioner has failed to prove there was reasonable cause or good
faith reliance for the undervaluation. Petitioner, on the other
hand, maintains that it relied on professional appraisers and
attorneys in preparing the return. Essentially, petitioner argues
that any tax understatements were in good faith and due to
reasonable cause.
The parties stipulated that "the fair market value of the
Class A voting shares and Class B nonvoting shares reported on the
estate tax return was based upon an appraisal report issued by
Morgan Stanley & Co., Incorporated." That appraisal was prepared
for the purpose of guiding the estate in preparation of its tax
return.
We have found (as an ultimate fact) that petitioner acted
reasonably and in good faith in relying on the advice of tax
professionals and appraisers in valuing decedent's class A voting
and class B nonvoting stock for Federal estate tax purposes. We
believe petitioner exercised ordinary business care and prudence in
attempting to determine its proper tax liability. See Mandlebaum
v. Commissioner, T.C. Memo. 1995-255. Morgan Stanley was a long-
time adviser to J.R. Simplot Co., having prepared annual appraisals
for the J.R. Simplot Co.'s ESOP which were relied upon by both the
trustees of the ESOP and the participating employee/stockholders.
Thus, we hold petitioner is not liable for the penalties at issue.
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