James H. Upchurch - Page 21

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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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