- 47 -
6662(a) because the underpayment of tax attributable to section
83 was due to negligence.
On the same day, the Commissioner mailed Systems a notice of
deficiency reflecting a determination that its 1990 taxable
income was increased by $300,000 because its contribution to the
Trust was governed by subpart D. Systems filed timely its 1990
tax return. The notice also stated that Systems was liable for a
$21,735 accuracy-related penalty under section 6662(a) because
its underpayment of income tax was due to a substantial
understatement.
B. Systems' Introduction to the Prime Plan
Max Chapman, Systems' independent C.P.A., introduced the
Johnsons to the Prime Plan, stating that it would be "useful in
tax planning". Mr. Carr was also involved in meetings concerning
Systems' decision to join the Prime Plan, and he reviewed some of
the plan's literature. One of the main selling features of the
Prime Plan from Mr. Carr's perspective was the "very thick
opinion letter". Mr. Johnson, individually and on behalf of
Systems, relied upon competent and informed tax and investment
advisers before joining the Prime Plan and in reporting the tax
ramifications that flowed therefrom.
C. Systems' Adoption of the Prime Plan
Systems joined the Prime Plan by executing an Adoption
Agreement dated and effective as of December 20, 1990, and by
making a $300,000 contribution to the Trust 6 days later. The
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