-57-
(10th Cir. 1989); Daugherty v. Commissioner, 78 T.C. 623, 641
(1982); Magill v. Commissioner, 70 T.C. 465, 479 (1978), affd.
651 F.2d 1233 (6th Cir. 1981); Pessin v. Commissioner, 59 T.C.
473, 489 (1972).
Under section 1.6664-4(b)(1), Income Tax Regs.,
circumstances that may establish reasonable cause and good faith
include an honest misunderstanding of fact or law that is
reasonable in light of the experience, knowledge, and education
of the taxpayer. Reliance on the advice of a professional (such
as an attorney or an accountant) does not necessarily demonstrate
reasonable cause and good faith. Reliance on professional advice
constitutes reasonable cause and good faith if, under all the
circumstances, such reliance was reasonable and the taxpayer
acted in good faith. Id.
The record shows that petitioner directed Lavantucksin to
make certain journal entries on the corporate records which Ricks
and Morrisett then used to prepare the returns. Morrisett
testified that he used the journal entries made by Lavantucksin
to reconcile the corporate books with petitioner's personal
books, but he did not verify the entries with bank statements,
canceled checks, the corporate minutes, or other external
sources. Therefore, the accountants unreasonably relied on
uncorroborated journal entries prepared at petitioner's
direction. Under these circumstances, petitioners' reliance on
the accountants was not reasonable.
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