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Commissioner, 902 F.2d 380 (5th Cir. 1990), revg. T.C. Memo.
1988-408; and Rosenthal v. Commissioner, T.C. Memo. 1995-603.
Section 1.6661-6(b), Income Tax Regs., provides that:
Reliance on * * * the advice of a professional (such as
an appraiser, an attorney, or an accountant) would not
necessarily constitute a showing of reasonable cause
and good faith. * * * Reliance on * * * professional
advice * * *, however, would constitute a showing of
reasonable cause and good faith if, under all the
circumstances, such reliance was reasonable and the
taxpayer acted in good faith. * * *
It is evident from the record that petitioner did not have
substantial authority, and, because of the nature of the
transaction (tax shelter), he is not entitled to rely on adequate
disclosure to reduce any substantial understatement.
Accordingly, we address whether petitioner's reliance was
"reasonable" and in "good faith." The cases4 cited by petitioner
apply the same standard as set forth in section 1.6661-6(b),
Income Tax Regs. In each of the cases, it appears that the
taxpayers relied on the advice of a tax professional who was
independent and had previously assisted the taxpayer, prior to
the time in question, in the acquisition and/or reporting of
transactions for investment and/or tax purposes.
For purposes of reporting Federal income taxes, petitioner
had not relied on accountants or lawyers prior to his involvement
4 It is noted that Durrett v. Commissioner, 71 F.3d 515 (5th
Cir. 1996), affg. in part and revg. in part T.C. Memo. 1994-179,
involves whether good faith reliance on tax professionals is a
"defense" to sec. 6621(c) and does not specifically concern a
substantial understatement under sec. 6661.
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