Donald DeCleene and Doris DeCleene - Page 34

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          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 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 that the            
          taxpayer meets each requirement of the following three-prong                
          test:  (1) The adviser was a competent professional who had                 
          sufficient expertise to justify reliance, (2) the taxpayer                  
          provided necessary and accurate information to the adviser, and             
          (3) the taxpayer actually relied in good faith on the adviser’s             
          judgment.  See Ellwest Stereo Theatres, Inc. v. Commissioner,               
          T.C. Memo. 1995-610; see also Rule 142(a).                                  
               We conclude on the record before us that petitioners                   
          actually relied in good faith on disinterested professional                 
          advisers who structured the transactions and prepared their                 
          return.  Petitioners were justified in their reliance,                      
          notwithstanding that we have upheld respondent’s determination              

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