- 20 -
to negligence but rather a factor to be taken into consideration.
In order for reliance on professional advice to excuse a taxpayer
from the additions to tax for negligence, the taxpayer must show
that the professional had the expertise and knowledge of the
pertinent facts to provide valuable and dependable advice on the
matter at hand. Goldman v. Commissioner, 39 F.3d 402, 408 (2d
Cir. 1994), affg. T.C. Memo. 1993-480; Freytag v. Commissioner,
supra; Kozlowski v. Commissioner, T.C. Memo. 1993-430, affd.
without published opinion 70 F.3d 1279 (9th Cir. 1995).
There were three taxpayers before this Court in Cramer v.
Commissioner, 101 T.C. 225 (1993). Two of the taxpayers claimed
millions of dollars’ worth of basis for their options, and the
third reported his sale of the options as a straightforward sale
of stock. We found in Cramer that the options, when granted, did
not possess a readily ascertainable fair market value. The
taxpayers in Cramer filed section 83(b) elections while knowing
that the options did not have fair market values of zero.
Finally, they knew at the time they filed their 1982 Federal
income tax returns that their position was subject to being
challenged. Consequently, we held that the taxpayers in Cramer
were subject to the additions to tax for negligence in part
because they signed 1982 returns that they knew, at the time,
contained material misrepresentations. The Court of Appeals for
the Ninth Circuit affirmed the imposition of the negligence
addition. 64 F.3d at 1414-1415.
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011