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Although petitioners argue they supplied their return
preparer, John Zahar (Mr. Zahar), with all relevant information to
determine their tax liabilities and that they reasonably relied in
good faith on his determinations, the record suggests otherwise.
The record is insufficient to establish Mr. Zahar’s knowledge
of income tax law or that petitioners had reason to believe he was
competent. Mr. Zahar had been a social acquaintance of Fuad and
the Mahmoud Daya family for the past 14 or 15 years. Petitioners
provided no evidence that they had Mr. Zahar prepare their returns
because of his knowledge of income tax law. Although Mr. Zahar
testified that he had been in the business of preparing tax
returns for the last 12 years, he offered no further testimony
regarding the nature of his business or his qualifications to
prepare income tax returns.
Petitioners also have failed to establish they provided Mr.
Zahar with all relevant information to determine their filing
status and their entitlement to the deductions at issue. Mr
Zahar’s testimony at times was vague and somewhat contradictory.
He testified he was not aware that petitioners did not hold legal
title to the Foster City residence in 1995, but then he testified
that he advised them to gain legal title in 1996. He indicated
that his understanding of the law was that in order to take
deductions with respect to a residence, a taxpayer must hold legal
title to the residence. Petitioners, thus, could not have relied
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