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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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