George Georgiou and Judith Georgiou A.K.A. Judy Georgiou, et al. - Page 39

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            taxpayer's treatment of the item was based on substantial                                      
            authority or was adequately disclosed in the return or in a                                    
            statement attached to the return.  Secs. 6661(b)(2)(B)(i) and                                  
            (ii), 6662(d)(2)(B)(i) and (ii).  The term "understatement" is                                 
            defined as the excess of the amount of tax required to be shown                                
            on the return for the taxable year over the amount of tax shown                                
            on the return for the taxable year, reduced by any rebate.  Secs.                              
            6661(b)(2), 6662(d)(2)(A).                                                                     
            A.  Section 6662 Penalty                                                                       
                  Respondent determined that the section 6662 accuracy-related                             
            penalty for Georgiou and Kolonaki was based on a substantial                                   
            understatement or, in the alternative, negligence.  Both carry                                 
            the same penalty.  Kolonaki and Georgiou (petitioners) argue that                              
            an accuracy-related penalty should not be imposed.                                             
                  Petitioners rely on section 6664(c), which states that the                               
            accuracy-related penalty does not apply with respect to any                                    
            portion of an underpayment if it is shown that there was                                       
            reasonable cause for such portion and that the taxpayer acted in                               
            good faith with respect to that portion.  Petitioners contend                                  
            that they are not liable for the penalty because they reasonably                               
            and in good faith relied upon the advice of professionals,                                     
            specifically, Pryor and Bernard.  But reliance on the advice of a                              
            professional does not necessarily demonstrate reasonable cause                                 
            and good faith.  Sec. 1.6664-4(b), Income Tax Regs.  "Reliance on                              
            professional advice, standing alone, is not an absolute defense                                

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