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6662(d)(2)(C)(ii), we conclude that the amount of the understate-
ment attributable to the disputed transaction would not be
reduced under section 6662(d)(2)(B)(ii).
With respect to respondent’s argument under respondent’s
alternative position that petitioner did not have reasonable
cause for, or act in good faith with respect to, its treatment of
the disputed transaction in petitioner’s 1993 return, petitioner
counters that petitioner relied generally on Price Waterhouse for
tax compliance and tax planning, that the disputed transaction
was based upon recommendations that Price Waterhouse made, and
that Price Waterhouse prepared petitioner’s 1993 return. Accord-
ing to petitioner, it was reasonable for it to rely upon Price
Waterhouse’s advice because Mr. Saunders knew that Price Water-
house was a reputable accounting firm with expertise in tax
matters.
Respondent contends that petitioner failed to provide Price
Waterhouse all of the necessary information regarding the dis-
puted transaction, including the following:
the funds for the purported dividend were to be pro-
vided by an overdraft of ITC’s RBC [Royal Bank] account
guaranteed by petitioner; * * * that preferred stock
would be purportedly issued and redeemed on the same
day * * *; and that petitioner had committed to RBC to
return the purported dividend to ITC’s RBC account the
next business day. * * * In addition, [Mr.] Bond testi-
fied that he did not know if PW [Price Waterhouse] was
aware of petitioner’s guarantee of ITC’s debts to RBC
* * *.
Respondent further contends that, even if petitioner had provided
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