Joel Hillman - Page 5

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          4.   Accuracy-Related Penalty                                                
               Respondent determined that petitioner is liable for a                   
          section 6662(a) accuracy-related penalty.  The penalty applies to            
          the portion of petitioner's underpayment that is attributable to             
          a substantial understatement of income tax.  Sec. 6662(b)(2).  If            
          petitioner establishes that he acted in good faith and there was             
          reasonable cause for claiming the deductions, an accuracy-related            
          penalty will not be imposed on the portion of the underpayment               
          relating to such deductions.  See sec. 1.6664-4(a), Income Tax               
          Regs.  Reliance on an accountant may demonstrate reasonable cause            
          and good faith.  Sec. 1.6664-4(b)(1), Income Tax Regs.                       
          Petitioner contends that he should not be liable for the                     
          accuracy-related penalty on the portion of the underpayment that             
          relates to the bad debt deductions because he reasonably relied              
          on the advice of his accountant.                                             
               While in prison, petitioner hired Mr. Casey to prepare the              
          1991 return.  Petitioner supplied Mr. Casey with all the                     
          available relevant records and did not withhold any information.             
          In addition, petitioner used his limited telephone privileges to             
          consult with Mr. Casey.  Mr. Casey proceeded incorrectly to                  
          report petitioner's bad debt loss as a $50,000 ordinary loss on              
          Form 4797 (Sales of Business Property) and a $3,000 capital loss             
          on Schedule D (Capital Gains and Losses).  Petitioner took                   
          reasonable efforts to assess his proper tax liability and                    
          reasonably relied on Mr. Casey's expertise in reporting, and                 
          determining the deductibility of, the bad debt.  Thus, petitioner            

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