AMW Investments, Inc. - Page 26

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          enough information to ensure proper compliance with those laws.             
          Although MBS failed to do its job properly, petitioner concludes,           
          petitioner’s reliance on them to do a proper job was consistent             
          with ordinary business care and prudence under the circumstances.           
               We do not agree.  Reasonable reliance on a tax adviser is              
          consistent with ordinary business care and prudence only in                 
          certain cases.  In those cases, the taxpayer must establish that:           
          (1) The adviser 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.  See, e.g., Ellwest Stereo Theatres of           
          Memphis, Inc. v. Commissioner, T.C. Memo. 1995-610.  Mr. Shindel            
          prepared and signed petitioner’s tax returns for the years in               
          issue.  His experience and qualifications were sufficient to                
          warrant reliance upon his judgement.  Although it appears that              
          petitioner has met the first prong, we find that it has failed to           
          satisfy the remaining prongs.  To the contrary, the record                  
          indicates that petitioner did not exercise due care, and it                 
          failed to do what a reasonable and ordinarily prudent person                
          would have done under the circumstances.  Petitioner claimed                
          erroneous deductions for legal expenses and interest expenses.              
          Petitioner also filed its tax returns untimely.  In the latter              
          regard, petitioner knew it was required to file timely a Federal            

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