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order to prepare complete and accurate tax returns for petitioner
and that Jung would be unable to prepare complete and accurate
returns given the information with which he was furnished.
Nor do we believe that Roach, as an officer of petitioner,
reasonably relied on his stated belief that a prior audit of the
disputed deductions did not result in a disallowance of them.
First, from a factual point of view, we are unable to find on the
basis of the credible evidence in the record that respondent in a
prior year actually passed upon the application of sections
162(a) and 274(a)(1)(B) to expenses similar to those underlying
the disputed deductions. According to Jung, Roach’s 1993
individual income tax return was the only prior return that was
audited, and respondent determined during this audit that 20
percent of the sailboat use at issue there was personal in
nature. We know nothing about the facts underlying that
determination or the facts underlying the earlier boat
(presumably, the Catalina). We do know, however, that the facts
underlying the earlier boat’s usage are different from the facts
at hand in that Roach only began to race sailboats earnestly in
1993. We also know that petitioner has not explained why, in
examining Roach’s personal income tax return, respondent would
have passed on an application of section 274(a)(1)(B). In a case
such as this involving a corporation and its sole shareholder,
that section serves to disallow the deduction taken for the
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