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Boyle, 469 U.S. 241, 250-151 (1985); sec. 1.6664-4(b)(1), Income
Tax Regs.
In this case, petitioners were completely inexperienced in
managing the financial affairs of a business and in operating
under the Subchapter S rules. The Board of Directors decided
that Southern Auto's profits should be dispersed to the
stockholders (Frank, Thomas, and Bob) based upon actual dollars
received as a percentage of the total. This allocation was then
presented to two different independent accountants, at least one
of whom was a Certified Public Accountant, who told petitioners
that this was acceptable and that the Board could allocate the
profit as a percentage of the actual distributions. Petitioners,
pursuant to this advice, provided the accountant with the actual
allocations of the distributions and the other financial
information from Southern Auto. We find that petitioners
reasonably relied upon the advice they received. Petitioners had
reasonable cause and acted in good faith. We find for
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