Calypso Music Incorporated - Page 13




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           reasonably when he or she arrives at that advice independently,            
           taking into account, among other things, the taxpayer's                    
           purposes for entering into the underlying transaction.  See                
           sec. 1.6664-4(c)(i), Income Tax Regs.; see also Leonhart v.                
           Commissioner, 414 F.2d 749 (4th Cir. 1969), affg. T.C. Memo.               
           1968-98.  Reliance may be unreasonable when it is placed upon              
           insiders, promoters, or their offering materials, or when the              
           person relied upon has an inherent conflict of interest that               
           the taxpayer knew or should have known about.  See Goldman v.              
           Commissioner, 39 F.3d 402 (2d Cir. 1994), affg. T.C. Memo.                 
           1993-480; LaVerne v. Commissioner, 94 T.C. 637, 652-653 (1990),            
           affd. without published opinion 956 F.2d 274 (9th Cir. 1992),              
           affd. in part without published opinion sub nom. Cowles v.                 
           Commissioner, 949 F.2d 401 (10th Cir. 1991).  Reliance also is             
           unreasonable when the taxpayer knew, or should have known, that            
           the adviser lacked the requisite expertise to opine on the tax             
           treatment of the disputed item.  See sec. 1.6664-4(c), Income              
           Tax Regs.                                                                  
                In sum, for a taxpayer to rely reasonably upon advice so              
           as possibly to negate a section 6662(a) accuracy-related                   
           penalty determined by the Commissioner, the taxpayer must prove            
           by a preponderance of the evidence that the taxpayer meets each            
           requirement of the following three-prong test: (1) The adviser             
           was a competent professional who had sufficient expertise to               






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