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papers long before petitioner filed his 1991 individual income
tax return. Respondent notes the 1992 and 1993 fiscal year
corporate returns of Tesco, which petitioner signed, recite the
incorporation date as November 15, 1991. Respondent also notes
that petitioner re-signed the incorporation papers after they
were returned by the State of Missouri due to a defect.
Respondent asks us to infer that petitioner’s prior knowledge
that the Missouri secretary of state had rejected the
incorporation papers equals knowledge that an error was made in
the allocation of income between petitioner’s individual and
Tesco’s corporate return. We disagree.
Even if petitioner knew that the incorporation papers had
been rejected, respondent did not show that petitioner knew both
that the $32,755 of income had been included in the corporate
return and excluded from his individual return, and that the
State of Missouri’s rejection of the incorporation papers
required petitioner, as a legal matter, to include the income
that was earned during the gap period on his individual return.
Petitioner testified without contradiction that he relied
on his accountant to prepare proper tax returns. His accountant
knew all the facts regarding the rejected incorporation papers
because he is the one who submitted them, received them back
unfiled, and then fixed and resubmitted them. Yet, even at the
time of trial, the accountant thought the income during the gap
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