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(4th Cir. 1988), affd. sub nom. Skeen v. Commissioner, 864 F.2d
93 (9th Cir. 1989), affd. without published opinion 865 F.2d 1264
(5th Cir. 1989); Pessin v. Commissioner, 59 T.C. 473, 489 (1972);
sec. 6664(c)(1); sec. 1.6664-4(b)(1) and (2), Example (1), Income
Tax Regs. Reliance on an adviser will not immunize the taxpayer
from liability, however, where the taxpayer knew or should have
known that its adviser lacked sufficient knowledge regarding the
subject matter of the consultation. Patin v. Commissioner,
supra; Ellwest Stereo Theaters v. Commissioner, T.C. Memo.
1995-610; sec. 1.6664-4(b)(1) and (2), Example (1), Income Tax
Regs.
It is undisputed that Maschmeyer relied on the advice of
petitioner’s accountant, Wagner, in determining a rental for the
lease of tracts A and B, and in preparing the corporate tax
returns reflecting these rental payments. Respondent argues that
the penalty is nevertheless appropriate because Maschmeyer did
not rely on the advice of a real estate appraiser. Respondent’s
argument is unwarranted on the particular facts of this case.
Maschmeyer is highly knowledgeable about a business he has been
engaged in for 20 years. Wagner is a C.P.A. with many years’
experience in tax return preparation and thorough familiarity
with petitioner’s tax and financial situation. It was not
unreasonable for Maschmeyer to believe that together they could
determine an arm’s-length rent that accounted for all relevant
business and financial factors. Their testimony and the exhibits
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