Forest L. Buckmaster - Page 15

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                              circumstances, including the experience and knowledge of the                                                                                                                                                                      
                              taxpayer and his or her reliance on a professional tax adviser.                                                                                                                                                                   
                              Sec. 1.6664-4(b)(1), Income Tax Regs.                                                                                                                                                                                             
                                             Petitioner argues that he is not liable for this penalty                                                                                                                                                           
                              because he did not understate his Federal income tax for 1992.                                                                                                                                                                    
                              This is so, petitioner contends, because Ideal Management was not                                                                                                                                                                 
                              a sham.  We have already held that Ideal Management was a sham.                                                                                                                                                                   
                              Nor do we find that petitioner had reasonable cause for his                                                                                                                                                                       
                              understatement.  We sustain respondent's determination on this                                                                                                                                                                    
                                             Turning to the final matter, respondent moved the Court at                                                                                                                                                         
                              the end of trial to impose a penalty under section 6673(a)(1).                                                                                                                                                                    
                              Respondent asserts that petitioner's position is frivolous and                                                                                                                                                                    
                              groundless, and that petitioner instituted this lawsuit primarily                                                                                                                                                                 
                              for delay.  In relevant part, section 6673(a)(1) provides:                                                                                                                                                                        
                                             SEC. 6673(a).  Tax Court Proceedings.--                                                                                                                                                                            
                                                                           (1)  Procedures instituted primarily for                                                                                                                                             
                                                            delay, etc.--Whenever it appears to the Tax                                                                                                                                                         
                                                            Court that--                                                                                                                                                                                        
                                                                                          (A)  proceedings before it                                                                                                                                            
                                                                           have been instituted or maintained                                                                                                                                                   
                                                                           by the taxpayer primarily for                                                                                                                                                        
                                                                                          (B)  the taxpayer's position                                                                                                                                          
                                                                           in such proceeding is frivolous or                                                                                                                                                   
                                                                           groundless, or                                                                                                                                                                       
                                                                           *              ***            *              *              *              *              *                                                                                          
                                             the Tax Court, in its decision, may require the                                                                                                                                                                    
                                             taxpayer to pay to the United States a penalty not in                                                                                                                                                              
                                             excess of $25,000.                                                                                                                                                                                                 

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Last modified: May 25, 2011