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to do what a reasonable and ordinarily prudent person would do
under the circumstances." Neely v. Commissioner, 85 T.C. 934,
947 (1985) (quoting Marcello v. Commissioner, 380 F.2d 499, 506
(5th Cir. 1967)).
A taxpayer can avoid liability for the accuracy-related
penalty if he engages a competent professional to prepare his
return, and he reasonably relies on the advice of that
professional. Freytag v. Commissioner, 89 T.C. 849, 888 (1987),
affd. 904 F.2d 1011, 1017 (5th Cir. 1990), affd. 501 U.S. 868
(1991). The taxpayer must show that he provided all relevant
information to the professional. Pessin v. Commissioner, 59 T.C.
473, 489 (1972).
Petitioner engaged Wayne Hoover, a C.P.A. with over 20 years
of experience, to prepare his 1990 and 1991 Federal income tax
returns. Petitioner was a longtime client of Mr. Hoover's and
heavily relied on Mr. Hoover's advice. After discussing the
facts with petitioner, Mr. Hoover advised petitioner to exclude
income under section 104(a)(2) and include the contingent legal
fees in his PMI stock basis. Since the burden of proof is on
respondent, she must prove that petitioner failed to provide
relevant information to Mr. Hoover and that petitioner's reliance
on Mr. Hoover was improper. Respondent has failed to meet this
burden. The penalties for 1990 and 1991 are not sustained.
Decision will be entered under
Rule 155.
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