Deja Vu, Inc. - Page 18

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          Section 6664(c)(1) of the Internal Revenue Code provides a                  
          reasonable cause exception to the accuracy-related penalty.                 
               Petitioner argues that it is within the exception under                
          section 6664.  Petitioner argues that it held an honest and good            
          faith belief about the deductibility of its unrecovered advances            
          based on its reasonable reliance on MBS to ensure tax compliance.           
          Petitioner also argues that it was unsophisticated in tax laws              
          and that it relied on MBS to provide Mr. Shindel with 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 we find that                 
          petitioner has met the first prong, we find that it has failed to           
          satisfy the remaining prongs.  Petitioner did not exercise due              

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