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Regulations interpreting section 6664(c) state:
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 pertinent facts
and circumstances. * * * Generally, the most
important factor is the extent of the taxpayer’s effort
to assess the taxpayer’s proper tax liability. * * *
[Sec. 1.6664-4(b)(1), Income Tax Regs.]
Furthermore, reliance upon the advice of an expert tax
preparer may, but does not necessarily, demonstrate reasonable
cause and good faith in the context of the section 6662(a)
penalty. See id.; see also Freytag v. Commissioner, supra at
888. Such reliance is not an absolute defense, but it is a
factor to be considered. See Freytag v. Commissioner, supra at
888. In order for this factor to be given dispositive weight,
the taxpayer claiming reliance on a professional such as an
accountant must show, at minimum, that (1) the accountant was
supplied with correct information and (2) the incorrect return
was a result of the accountant’s error. See, e.g., Ma-Tran Corp.
v. Commissioner, 70 T.C. 158, 173 (1978); Pessin v. Commissioner,
59 T.C. 473, 489 (1972); Garcia v. Commissioner, T.C. Memo. 1998-
203, affd. without published opinion 190 F.3d 538 (5th Cir.
1999).
Applying these principles to the instant case, we conclude
that petitioners have sustained their burden of establishing
reasonable cause and good faith for the deduction taken on their
return. Petitioner first inquired of his real estate agent, an
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