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Argument by petitioners specifically directed toward the
penalties is limited to the following statement on reply brief:
Petitioner pleads with the court to accept that
Petitioner indeed relied on Ernst & Young for both the
LBO structure and all tax matters and that Petitioner
did not have cause it [sic] not trust their tax advise
[sic] until Petitioner was provided access to evidence
from company bankruptcy court requested documents, and
that Petitioner did not intentionally cause his tax
returns to be in error, especially with the large Tax
Basis that Petitioner made the assumption that he had a
right to...
Thus, petitioners here would seem to assert a reliance defense as
the grounds upon which they should be relieved of liability for
the section 6662(a) penalties.
The record, however, is insufficient to support such a
defense. While the Court has little doubt that petitioners
relied on E&Y’s work at various junctures during Mr. Gleason’s
participation in the LBO transaction, the nexus between that work
and the specifics reported on petitioners’ returns is simply
unclear. The returns and amended returns were all professionally
prepared, either by Thomas & Associates or by Plante & Moran,
LLP. Nothing in the record addresses the qualifications of those
firms. Petitioners have also declined to offer any evidence, or
even allegations, with respect to the information provided to the
preparers or the extent to which such information might have
incorporated work generated by E&Y.
Consequently, although the Court sympathizes with
petitioners and is confident that they did not set out
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