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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.
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