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acquired as described above was substantially greater than the
duration of the purported leases.
Northcutt's clerk prepared UCI's 1989 and 1990 tax returns
based on the ledgers and invoices provided by UCI. Northcutt did
not review the purported lease transactions that were entered
into by UCI. Neither Northcutt nor her clerk verified the lease
expenses as part of UCI's return preparation. Petitioner
deducted the payments for the asset acquisitions as "Lease
Expense" on its 1989 and 1990 tax returns in the aggregate
amounts of $141,105 and $56,925, respectively. Northcutt
reviewed and checked the returns before sending them to UCI for
signature. Jump and Schubert each spent 5 to 10 minutes
reviewing the Federal income tax returns after they were received
from Northcutt. Schubert, as president of UCI, signed the
returns in both 1989 and 1990.
OPINION
Respondent determined that the lease expenses claimed by
petitioner were capital expenses and disallowed the deductions.
Petitioner has conceded the $68,587 and $33,638 deficiencies for
1989 and 1990, respectively. Petitioner argues, however, that it
is not liable for the accuracy related penalties because there
was substantial authority for its position on its tax returns and
because petitioner's reliance on its accountant was reasonable
and in good faith. Respondent contends that there is no
substantial authority for petitioner's position on its tax
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