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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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