- 13 - The reliance must be objectively reasonable; taxpayers may not rely on someone with an inherent conflict of interest, or someone with no knowledge concerning that matter upon which the advice is given. In this regard, the Supreme Court noted that "when an accountant or attorney advises a taxpayer on a matter of tax law, such as whether liability exists, it is reasonable for the taxpayer to rely on that advice." [Fn. refs. omitted.] The Court of Appeals, in a footnote, made the comment that the Chamberlain case "demonstrates that one may enter into a transaction without a profit motive but not be negligent in claiming a tax loss if that claim is in reasonable reliance on the advice of a tax expert." Id. at 733 n.23. Respondent contends that the Chamberlain holding is distinguishable from petitioner's situation. The tax or professional adviser in Chamberlain was an accountant unaffiliated with the investment promoters or sellers and, therefore, did not have a conflict of interest. See Chamberlain v. Commissioner, T.C. Memo. 1994-228. Finally, in Norgaard v. Commissioner, supra at 880, the Court of Appeals for the Ninth Circuit found that the taxpayers' method of accounting for gambling losses met the standard of due care or "what a reasonable and prudent person would do" and consequently that they were not negligent. Respondent contends that Norgaard is distinguishable because the deductions in that case would have been allowable if substantiated. Here, petitioner must show that he met the standard of care that the Court of Appeals for the Ninth Circuit found was met in Norgaard.Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
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