- 24 - the taxpayer’s efforts to assess the proper tax liability. Id. An honest misunderstanding of fact or law that is reasonable in light of all of the facts and circumstances, including the knowledge and experience of the taxpayer, may also indicate reasonable cause and good faith. Id. Petitioners must establish error in respondent’s determination that they are liable for the penalty provided by section 6662(a). Rule 142(a); Estate of Monroe v. Commissioner, 104 T.C. 352, 366 (1995). We conclude, however, that petitioners are liable for the penalty. Although petitioners employed a tax return preparer to complete the return, they admit that they did not give complete information to the preparer concerning the sale of the shares and acknowledge their responsibility for the errors in the return. In reporting the sale on their 1989 return, petitioners included only the cash received, $67,950, and claimed a basis of $45,000, which petitioner admitted at trial was incorrect. Petitioners also admit that they did not correctly report the basis of the shares because petitioner did not have adequate records. Petitioner testified that he considered the basis claimed on the return to be the basis in the first group of shares that he had purchased in 1985. Petitioner thus apparently reported the sale of the shares as involving only a portion of the shares, even though all 5,200 of the shares were redeemed by Drexel in 1989. Petitioners contend that they eventually were able to correct the erroneous basis claim in their 1989 return by filing an amendedPage: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Next
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