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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 the pertinent facts and circumstances. See sec.
1.6664-4(b)(1), Income Tax Regs.34 The most important factor is
the extent of the taxpayer's effort to assess the taxpayer's
proper tax liability. See id.
Petitioners contend that the accuracy-related penalties are
inappropriate in the instant case because they relied on their
C.P.A., Arthur Andersen, to prepare their returns accurately.
Generally, the duty of filing accurate returns cannot be avoided
by placing the responsibility on a tax return preparer. See
Metra Chem Corp. v. Commissioner, 88 T.C. 654, 662 (1987).
Reliance on a qualified adviser, however, may demonstrate
reasonable cause and good faith if the evidence shows that the
taxpayer contacted a competent tax adviser and provided the
adviser with all the necessary and relevant information. See
Jackson v. Commissioner, 86 T.C. 492, 539-540 (1986), affd. 864
F.2d 1521 (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).
34 Sec. 1.6664-4, Income Tax Regs., revised Apr. 1, 1995,
applies to returns the due date of which (determined without
regard to extensions of time for filing) is on or before Sept. 1,
1995. See sec. 1.6664-1(b)(2), Income Tax Regs.
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