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the family residence would be nontaxable. Further, we believe
petitioner acted in good faith in reaching this erroneous
conclusion.
Petitioner trusted and relied upon Mr. Cheshire when it came
to the preparation of their tax returns. She is an elementary
school teacher, having taken no courses in accounting or tax return
preparation. She asked Mr. Cheshire about the potential tax
ramifications of the retirement distributions, and Mr. Cheshire
assured petitioner that he had consulted with a certified public
accountant and had been advised that the payment of the outstanding
mortgage on the family residence and any amount rolled over into a
qualified account reduced the taxable amount of the retirement
distributions. Mrs. Cheshire had no reason to doubt the
truthfulness of Mr. Cheshire’s statement, and in fact believed him.
Under these circumstances, we do not believe petitioner had an
obligation to inquire further.
We conclude that petitioner would have been justified in
believing that $58,163 ($199,771 - $42,183 (rollover) - $99,425
(mortgage repayment)) of the $199,771 retirement distributions was
taxable. Indeed, $199,771 in retirement distributions was reported
on the 1992 return, albeit only $56,150 was included in the
calculation of income. (The record does not reveal the $2,013
difference between $58,163 and $56,150; we deem the $2,013
difference to be de minimis.) In our opinion, it is an abuse of
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