- 26 -
substantial authority. See Antonides v. Commissioner, 91 T.C.
686, 702-703 (1988) (cases that are factually distinguishable are
not substantial authority), affd. 893 F.2d 656 (4th Cir. 1990);
see also Estate of Reinke v. Commissioner, 46 F.3d 760, 765 (8th
Cir. 1995), affg. T.C. Memo. 1993-197.
Petitioners also claim that, with respect to any
underpayment, there was reasonable cause and each acted in good
faith. Petitioners argue that both elements, reasonable cause
and good faith, are established by Markovski’s ignorance of the
law and reliance on his tax adviser, Bolonik. Section 1.6664-
4(b), Income Tax Regs., states:
The determination of whether a taxpayer acted with
reasonable cause and in good faith is made on a case-
by-case basis, taking into account all pertinent facts
and circumstances. The most important factor is the
extent of the taxpayer’s effort to assess the
taxpayer’s proper tax liability. Circumstances that
may indicate 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 appraiser,
attorney or 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. * * *
Bolonik’s testimony clearly establishes that he both determined
the tax treatment of the American Valmar deposits and the
Markovski deposits (and related items) and prepared the
petitioners’ returns. We can, thus, assume that the petitioners
relied on him in determining their tax liabilities. Bolonik’s
Page: Previous 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NextLast modified: May 25, 2011