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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 amended
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