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Since the record before us fails to explain how or why particular
individuals were selected to receive the distributed amounts, we
believe there exists a reasonable probability that Mr. Valentino
was likewise without the benefit of such data. The various
aberrations in reporting treatment further support this view that
Mr. Valentino may have had a limited understanding of the streams
of funds flowing out of FIL.
In these circumstances, we hold that petitioners have failed
to prove that their reliance on their accountant was reasonable
and in good faith. Petitioners are liable for the section
6662(a) accuracy-related penalties on the alternative grounds of
negligence and/or substantial understatement of income tax.
Other contentions of the parties have been considered and, to the
extent not discussed herein, have been resolved by our
determinations above, rendered moot, or found unconvincing.
To reflect the foregoing,
Decisions will be entered
under Rule 155.
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