- 50 -
We have found that petitioner was not aware of the errors
relating to the disallowed automobile expenses that Mr. McVeigh
made in Schedules C of petitioner's 1989, 1990, and 1991 returns
relating to Psychological Testing Services and that he could not
have detected them by reviewing those returns.
On the record before us, we find that petitioner's reliance
on Mr. McVeigh with respect to the claimed disallowed automobile
expenses in petitioner's returns for the years at issue was
reasonable and in good faith. Consequently, we reject respon-
dent's determinations imposing the accuracy-related penalty on
the portion of the underpayment for each such year that is
attributable to those disallowed expenses.
Substantial Understatement of Income Tax
Petitioner's Claimed Deductions of Losses
From His Horse Activity and His Cattle Activity
We have found that, based on what petitioner told Mr.
McVeigh about his horse activity and his cattle activity, includ-
ing that he intended to buy, train, and sell horses34 and that he
had incurred certain expenses for various stables and training
centers that Mr. McVeigh believed to be reputable, Mr. McVeigh
concurred in petitioner's conclusion, and he and petitioner
jointly decided, that the gross income, expenses, and loss from
34 We note that this finding is based on Mr. McVeigh's testimony
as to what petitioner told him about his intention with respect
to his horse activity.
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