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fact of the scrap metal proceeds from Neal. Thus, Neal had an
“honest misunderstanding of fact”, sec. 1.6664-4(b)(1), Income
Tax Regs., that Simco was reporting all of its income. This
misunderstanding was certainly reasonable in light of the fact
that Neal had no “knowledge” about the scrap metal sales until
August of 1992, after Simco’s original returns were filed. See
sec. 1.6664-4(b)(1), Income Tax Regs. Moreover, in filing
Simco’s amended returns, Neal relied upon the advice of the
company’s accountant. Such reliance was reasonable and in good
faith. See id.; sec. 1.6664-4(c), Income Tax Regs. Therefore,
imputing Neal’s acts to Simco, we hold that Simco is not liable
for accuracy-related penalties.
To reflect the foregoing,
Decision will be entered for
respondent with respect to the
deficiencies and for petitioner
with respect to the penalties in
docket No. 1730-96.
Decision will be entered for
respondent in docket No.
1731-96.
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