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taxpayers reasonably believed that the claimed tax treatment was
"more likely than not" the proper tax treatment. Sec.
6661(b)(2)(C)(i)(II). For this purpose, section
6661(b)(2)(C)(ii) defines a tax shelter as any partnership or
other entity or investment plan or arrangement the principal
purpose of which is the avoidance or evasion of Federal income
tax.
Section 6661(c) authorizes respondent to waive any part of
the addition to tax imposed under section 6661(a) upon a showing
by the taxpayers of reasonable cause for the understatement and
that the taxpayers acted in good faith. The most important
factor in determining whether to grant a waiver is "the extent of
the taxpayer's effort to assess the taxpayers' proper tax
liability under the law." Sec. 1.6661-6(b), Income Tax Regs.;
Mailman v. Commissioner, 91 T.C. 1079, 1083-1084 (1988).
Reliance upon the advice of a professional will not constitute a
showing of reasonable cause and good faith unless, under all the
circumstances, such reliance was reasonable in light of the
taxpayers' experience, knowledge, and education. Sec. 1.6661-
6(b), Income Tax Regs. Thus, if it was reasonable for the
taxpayers to rely on their financial adviser or accountant under
the circumstances, and the taxpayers did so in good faith, then
the Commissioner may waive the penalty. Vorsheck v.
Commissioner, 933 F.2d 757 (9th Cir. 1991), affg. in part and
revg. in part an Oral Opinion of this Court.
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