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accomplished fact of his purchase of the Lawrence Drive property.
Petitioners’ 1993 income tax return, prepared by petitioner’s
accountant, reported a taxable short-term gain of $5,373 on the
sale of “investment land” and reported a like-kind exchange of
“land and building” for “land and building” on Form 8824. The
disclosures were bare bones but adequate to trigger the audit
that led to the deficiency notice and the case at hand.
Respondent determined that petitioners were liable for an
accuracy-related penalty under section 6662(a) and (b)(1) or (2).
Section 6662(a) imposes a 20-percent accuracy-related penalty on
the portion of an underpayment that is due to one or more causes
enumerated in section 6662(b). Respondent relies on subsections
(b)(1) (negligence or intentional disregard of rules or
regulations) or (b)(2) (substantial understatement of income
tax).
Petitioners argue they are not liable for the penalty.
Petitioners point out that a certified public accountant outlined
the subject transactions as they were carried out and prepared
their return and that the deal was structured and the papers
drawn by petitioners’ attorneys. Petitioners contend that they
reasonably relied on professional advice in the preparation of
their return and that they are entitled to relief under the
exceptions that apply to a substantial understatement.
Negligence includes a failure to attempt reasonably to
comply with the Code. See sec. 6662(c). Disregard includes a
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