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information returns furnished by Ventures and Limited and filed
his returns consistent with the information returns received from
those entities.” As discussed below, petitioners’ arguments are
unpersuasive.
Section 7491 applies to court proceedings arising in
connection with examinations commencing after July 22, 1998.
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(c)(1), 112 Stat. 727. The record in
these cases establishes that respondent’s examination of the
Roses’ joint income tax returns began before July 22, 1998.
Furthermore, the record in these cases negates reasonable cause.
The Roses conceded that they failed to report a number of items
of income on their joint income tax returns for 1990 through
1993. Contrary to petitioners’ argument, the evidence does not
establish that the Roses’ failure to report these items of income
was the result of Rose’s reliance on the tax professionals that
prepared the returns for PKV&S, PKVI LP, or Zephyr. In addition,
the evidence establishes that the Roses’ inability to calculate
the bases of their interests in PKVI LP and Zephyr and to claim
losses from those entities in the correct amounts and in the
correct years did not result from the Roses’ reliance on the
information that was reported on the Schedules K-1 that they
received from those entities. The evidence also establishes that
Rose was well versed in corporate finance and that he made the
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