- 37 -
in good faith with respect to that portion. Sec. 6664(c)(1).
The determination of whether a taxpayer acted with
reasonable cause and good faith within the meaning of section
6664(c)(1) is made on a case-by-case basis, taking into account
all the pertinent facts and circumstances. Sec. 1.6664-4(b)(1),
Income Tax Regs. The most important factor is the extent of the
taxpayer's efforts to assess the taxpayer's proper tax liability.
Id. 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, however, constitutes reasonable cause and good faith if,
under all the circumstances, such reliance was reasonable and the
taxpayer acted in good faith. Id.
Petitioners assert that they are not liable for any section
6662(a) penalty, because they relied upon the advice of their
attorneys and their certified public accountant in reporting
their income.
Petitioner testified that at different times he asked
Branton, who was hired to represent petitioner in his personal
injury lawsuit, Thomas Weir (Weir), a tax attorney from San
Antonio, and Bill Elms (Elms), petitioners' certified public
accountant, if the settlement amount was taxable. Petitioner
testified that all told him that none of the settlement amount
was taxable.
Branton testified that he did not consider himself to be a
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011