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to prepare their returns properly. The notice of deficiency
determined a section 6662 penalty for 1990 for negligence, not
for a substantial understatement of income tax.5 We hold that
petitioners are liable for the accuracy-related penalty for the
taxable year 1990 under section 6662(b)(1).
Nearly all of the unreported income for 1991 stemmed from
petitioner's financial planning business. The 1991 return as
filed reported Form 1099 nonemployee compensation of only
$12,875.24. Form 1099 nonemployee compensation of $76,259 was
omitted from that return, an omission of 85 percent of such
income. Where the omission of income is so great, we cannot find
that petitioner's reliance on the IRS representative for the
preparation of the 1991 return was reasonable. Petitioner was
negligent. Petitioner was a financial planner and as such knew
or should have known that he was failing to report most of his
income from that business. The understatement of income tax was
clearly a substantial understatement. We hold petitioners are
liable for the accuracy-related penalty for the taxable year 1991
under section 6662(b)(2).
5It appears that the amount of the understatement even as
determined in the deficiency notice did not exceed the greater of
(1) 10 percent of the tax required to be shown on the return or
(2) $5,000. Sec. 6662(d)(1)(A).
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