- 25 -
the experience, knowledge, and education of the taxpayer. Id.
Petitioners must establish error in respondent's determination
that they are liable for the penalty provided by section 6662(a).
Rule 142(a); Estate of Monroe v. Commissioner, 104 T.C. 352, 366
(1995).
Petitioners contend that the portion of the underpayment
resulting from the deduction of legal fees is not attributable to
negligence or disregard of rules or regulations. Petitioners
argue that they "made a reasonable attempt to comply with the tax
law and did not disregard rules or regulations", as evidenced by
petitioner's belief "that the vast majority of the legal fees
were incurred in connection with the embezzlement suit and were
attributable to years prior to 1990", which "was supported by the
testimony of Mr. Cramer". Additionally, petitioners argue that
the amount of the understatement subject to the penalty should be
reduced because petitioner, a certified public accountant,
"researched the issues" and believed that the deductions were
supported by "substantial authority".
Respondent, on the other hand, argues that petitioners were
negligent in claiming a deduction for attorneys' fees incurred to
recover tax exempt income. Respondent contends that there is "no
evidence that the attorneys' fees were paid for services rendered
for any purpose other than in pursuit of the life insurance
proceeds." Additionally, respondent argues that the section 6662
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011