- 7 -
918, 920 (9th Cir. 1996), affg. T.C. Memo. 1994-217; see Greene
v. Commissioner, supra.
A taxpayer may avoid liability for negligence penalties
under some circumstances if the taxpayer reasonably relied on
competent professional advice. See Freytag v. Commissioner, 89
T.C. 849, 888 (1987), affd. 904 F.2d 1011 (5th Cir. 1990), affd.
on other issue 501 U.S. 868 (1991). Such reliance, however, is
“not an absolute defense to negligence, but rather a factor to be
considered.” Id. For reliance on professional advice to excuse
a taxpayer from the negligence additions to tax, the taxpayer
must show that the professional adviser had the expertise and
knowledge of the pertinent facts to provide informed advice on
the subject matter. See id.
The record does not establish the exact nature of the
underlying partnership investment in this case. No prospectus or
private placement memorandum was produced, few facts on the exact
nature of the investment were stipulated, and no witnesses other
than petitioner testified at trial. Nevertheless, a fair reading
of the stipulation of facts and the briefs of the parties shows
that they agree that the underlying facts of the partnership
operations are as discussed in Utah Jojoba I Research v.
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