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experienced broker, regarding a potential decline in value as a
result of events stemming from the alleged Simpson murders. He
then sought advice from his accountant Kitay concerning the
propriety of a casualty loss deduction. Kitay, in turn,
discussed devaluation with two additional real estate brokers.
Kitay’s opinion that a typical appraisal would be inconclusive as
to petitioners’ property also appears to have played a
significant role in the decision not to seek such an evaluation.
Moreover, the explanatory statement prepared by Kitay and
attached to petitioners’ return indicates, on the part of
petitioners, both communication to the accountant of relevant
information and good faith. Petitioners supplied Kitay with
factual data related to the nature of the loss, and they chose to
make full disclosure rather than to obscure the reasons for their
deduction. We therefore conclude that petitioners did not
exhibit the type of unreasonableness or imprudence that would
support imposition of the section 6662(a) accuracy-related
penalty.
We further observe that on brief respondent alternatively
contends that petitioners should be held liable for the section
6662(a) penalty on the grounds of a substantial understatement of
income tax. See sec. 6662(b)(2). We note, however, that the
notice of deficiency sent to petitioners reads, in the section
explaining the accuracy-related penalty: “Underpayment due to
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