Lucian T. Baldwin, III - Page 44

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          of deficiency or that respondent suffered any harm as a result of           
          his reliance.  Petitioner also contends that the duty of                    
          consistency does not apply because petitioner did not                       
          intentionally misrepresent BAC’s S status or even know that BAC’s           
          S election was improper.                                                    
               Petitioner’s argument that respondent could not have                   
          reasonably relied upon BAC’s S corporation election when issuing            
          the notices of deficiency, because respondent knew or had reason            
          to know the S election was invalid, is based on the testimony of            
          his accountant, Mr. DiMaggio.  Mr. DiMaggio testified that the              
          auditing agent, Ms. Witek, became aware of a problem with BAC’s S           
          corporation election by watching petitioners’ divorce proceeding            
          in 1991.                                                                    
               Taking Mr. DiMaggio’s testimony in context, it appears that            
          the problem Mr. DiMaggio described in his testimony involved a              
          dispute between petitioners regarding the ownership of BAC, not             
          the validity of its S election.  Even if we were to believe Mr.             
          DiMaggio’s testimony that Ms. Witek somehow became aware of a               
          dispute between petitioners regarding the ownership of BAC, we              
          disagree with petitioner’s conclusion that such knowledge put               
          respondent on notice regarding a problem with BAC’s S election.             
          Although petitioners raised an issue regarding which one of them            
          owned BAC during the pendency of the divorce case, neither                  
          petitioner raised or acknowledged any issue concerning the                  

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