- 24 - Mr. Kelly contests petitioners' liability for accuracy- related penalties using largely the same arguments he used to challenge the additions to tax for 1986 and 1987. There is no dispute that the negligence penalty applies to the portion of the underpayment attributable to petitioners' unsubstantiated employee business expense deductions. Valadez v. Commissioner, T.C. Memo. 1994-493; sec. 1.6662-3(b)(1), Income Tax Regs. Reliance on professional tax advice may qualify for the reasonable cause and good faith exception. Sec. 1.6664-4(b)(1), Income Tax Regs. Yet inasmuch as Mr. Kelly failed to prove the accuracy of the information on which petitioners' return preparer based his judgment, he cannot avoid application of the negligence penalty to the ordinary loss deductions. Eyefull Inc. v. Commissioner, T.C. Memo. 1996-238; Saghafi v. Commissioner, T.C. Memo. 1994-238. Mr. Kelly's contention that petitioners adequately disclosed the relevant facts relating to their treatment of the trading losses is likewise without merit. Petitioners' returns for 1989 through 1992 describe Mr. Kelly's business as "trader", and an attachment to each return lists Mr. Kelly's trades during the year. This information does not constitute adequate disclosure. The adequate disclosure exception to the negligence penalty is provided for in sections 1.6662-3(c) and -4(f), Income Tax Regs., which became effective for returns due after December 31, 1991.Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Next
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