Tony L. Zidar and Kathleen I. Zidar - Page 20




                                       - 20 -                                         
          losses of $66,121 from a stock car activity that from all                   
          indications was predominantly for Tony’s pleasure and recreation.           
               Petitioners contend that no penalty should apply because               
          they relied upon Hayes to draft their 1992 Federal income tax               
          return.  Petitioners failed to prove that they provided Hayes               
          with complete information for preparing their 1992 return.                  
               In a letter to Tony dated March 7, 1994, Hayes noted that              
          all information used to prepare the return came from either Tony            
          or one of Tony’s agents.  Although Tony received monthly,                   
          quarterly, and annual statements reflecting the balance on his              
          CRC shareholder account, there is no evidence that petitioners              
          shared the information contained in these statements with Hayes.            
               In his March 7, 1994, letter, Hayes also stated that the               
          reported loss relating to Tony’s stock car activity “is large and           
          will probably be subject to audit.  It was reported on your                 
          return upon your assurance that the racing venture was entered              
          into with the purpose of obtaining a profit”.  From this                    
          disclaimer, it appears that Hayes was relying on petitioners’               
          judgment, rather than the other way around.                                 
               Petitioners have not established that they acted in good               
          faith and had reasonable cause in understating their capital                
          gains from the CRC stock redemption or in claiming the losses               
          relating to the stock car activity.  We sustain respondent’s                
          determination on this issue.                                                







Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011