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an underpayment if there was reasonable cause for such portion and
the taxpayer acted in good faith. Sec. 6664(c)(1). Such a
determination is made by taking into account all facts and
circumstances, including the experience, knowledge, and education
of the taxpayer and reliance on a professional tax adviser. Sec.
1.6664-4(b)(1), Income Tax Regs.
With regard to the instant case, petitioners' real estate
agent suggested that Mr. De Ocampo's parents purchase the Montclair
property and obtain a mortgage because petitioners had credit
problems. Petitioners informed their tax return preparer that they
did not hold title to the Montclair property. They relied on the
preparer to properly report the transaction, and indeed the
transaction was reported on Form 2119. Petitioners made mortgage,
insurance, and tax payments on the Montclair property, as though
they were the owners. Under the facts and circumstances presented
herein, we believe that petitioners acted in good faith and with
reasonable cause in reporting the transaction. We therefore hold
that petitioners are not liable for the accuracy-related penalty.
To reflect the foregoing,
Decision will be entered
for respondent as to the
deficiency, and for petitioners
as to the accuracy-related
penalty under section 6662(a).
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Last modified: May 25, 2011