Opinion ID: 508452
Heading Depth: 1
Heading Rank: 4

Heading: Good Faith Reliance Upon Tax Accountant

Text: A. Evidentiary Foundation 75 In addition, Duncan assigns as error the refusal of the District Judge to give the following instruction: 76 Good faith is a complete defense to the charges in the Indictment since good faith on the part of a defendant is inconsistent with the existence of willfulness, which is an essential element of the crime. The burden of proof is not on the defendant, of course, since he has no burden to prove anything. The government must establish beyond a reasonable doubt that the defendant acted willfully as charged in the Indictment. 77 However, a defendant will not be willfully doing wrong if he relied in good faith on an accountant whom he honestly believed competent, made a full and complete disclosure to his accountant of all material facts of which he had knowledge, and then acted strictly in accordance with the advice given to him by his accountant. 78 Whether the defendant acted in good faith in relying on an accountant whom he honestly considered competent, and whether he made a full and complete disclosure to his accountant, and whether he acted strictly in accordance with the advice rendered to him by his accountant, are all questions for you to determine. 79 As evidence of his good faith reliance upon Downing, Duncan pointed to (1) the overall circumstances of the transactions in question and of his relationship to Downing; (2) specific testimony about the preparation of the returns in question; and (3) his own hearsay statements of reliance which were admitted at trial via the testimony of live witnesses. 9 80 There was testimony that Downing, a CPA whose firm prepared a modest number of tax returns on a regular basis, was Duncan's regular preparer and indeed had promised to handle Duncan's returns each year for the rest of his life for no charge, apparently in forgiveness of a debt. Moreover, the Government's own theory cast Downing as the initiator of the Blalock transaction and as in possession of all information relevant to it. 81 Second, one Downing employee, Burke Wallace, described Duncan's tax return preparation as a bag job in which the taxpayer would bring in his records in a brown bag and the accountants would have to sort through them. Mark Lund's description of the preparation of the 1982 return was that he obtained all information from Downing. Although neither Downing employee's testimony tended specifically to establish reliance, each was consistent with this theory. 82 Finally, Stanley Roy, a CPA who accompanied Duncan to a 1984 audit conference with an IRS agent named Mary Patricia Hitchcox, testified that Duncan told the agent he relied on Downing's expertise both on the specific issue of the right of first refusal and for general tax preparation: 83 Q: Did [Ms. Hitchcox] ask him as to whether or not [Duncan] understood that option and all those questions pertaining to an option? 84 A: Yes. And he said, Well, Mike Downing handled that. I don't really know too much about it, but he handled it and it paid off some debt that I had at the bank. 85