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Internal Revenue Service. Later, after this Court's first
opinion in Downey v. Commissioner, 97 T.C. 150 (1991), KPMG Peat
Marwick prepared amended Federal income tax returns for 1988,
1989, and 1990, which petitioners filed on December 9, 1991,
claiming that all of the settlement payments were excludable from
petitioner's gross income.
Under some circumstances a taxpayer may avoid liability for
negligence if reasonable reliance on a competent professional
adviser is shown. United States v. Boyle, 469 U.S. 241 (1985);
Freytag v. Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d
1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991). Here it is
clear that petitioners made a good faith effort and acted
reasonably and prudently in attempting to comply with section
6662 by supplying their certified public accountant with all the
information necessary to correctly report the item subject to
adjustment. Petitioners hired an experienced accountant and tax
expert, and they relied on his advice. Therefore, we hold that
the imposition of the accuracy-related penalties for negligence
for 1989 and 1990 was improper and that petitioners are not
liable for them.
To reflect concessions and our conclusions with respect to
the contested issues,
Decision will be entered
under Rule 155.
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