-7-
241 (1985); sec. 1.6664-4(b), Income Tax Regs., individual
taxpayers relying upon this exception must prove by a
preponderance of evidence: (1) The adviser was a competent
professional who had sufficient expertise to justify reliance;
(2) the taxpayer provided necessary and accurate information to
the adviser; and (3) the taxpayer actually relied in good faith
on the adviser’s judgment, Neonatology Associates, P.A. v.
Commissioner, 115 T.C. 43, 99 (2000), affd. 299 F.3d 221 (3d Cir.
2002); Ellwest Stereo Theatres, Inc. v. Commissioner, T.C. Memo.
1995-610; see also Rule 142(a)(1). On the basis of the credible
evidence in the record, which we do not find includes the
testimony of Hill, we are unable to conclude that each of these
requirements has been met. To say the least, Hill is a
college-educated individual who for many years has known about
his obligation to pay Federal income taxes on the income
generated from his services, yet neither he nor his wife ever
consulted a competent professional concerning the Federal income
tax consequences of Re-Cap Trust, which, according to their
reporting position, now conceded by them to be wrong, allowed
them to deduct otherwise nondeductible personal expenses and
ultimately pay only $1,279 of income taxes ($1,024 + $255) on
$332,085 of personal service income ($332,520 - $435). We
sustain respondent’s determination as to the accuracy-related
penalty.
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