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time of his tax return preparation, inquired of his return
preparer about whether an inheritance from his father was
taxable. Edgar was not knowledgeable about the legal proceedings
brought by the State. He believed that because he had already
received the money from his father’s trust, it was his
inheritance. The return preparer, a certified public accountant
who specialized in taxation and who had prepared Edgar’s returns
since 1969, after hearing the facts of which Edgar was aware,
advised that it was not taxable.
On Edgar’s 1989 Federal income tax return, he reported three
items of income as follows: $3,122 interest, $1,419 gross
business receipts, and $7,405 as a nontaxable pension. Edgar’s
1989 Federal income tax return was timely filed on October 15,
1990, pursuant to extensions to file granted by respondent. On
September 5 and 6, 1996, the Internal Revenue Service and Edgar
signed an agreement consenting to extension of the period for
assessment of his 1989 tax year to December 31, 1997. On May 20
and 29, 1997, a similar consent was executed to extend the period
to December 31, 1998. The notice of deficiency for the 1989 tax
year was mailed to Edgar on August 27, 1998.
A 1989 return was not filed for Victor, the trust, or Magna
Carta. Victor’s estate was not probated, and an estate tax
return was not filed for Victor’s estate. Magna Carta paid an
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