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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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