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Petitioners’ regular accountant, Mr. Fettkether, estimated
petitioners’ Federal income tax liability for 1988 by taking into
account the information from the Schedule K-1 and prepared Form
4868, which petitioners signed and filed. Petitioners offered no
evidence regarding whether they informed Mr. Henss, when they
hired him to prepare their 1988 income tax return, that the
partnership and its partners consistently had claimed the ranch
as partnership property or whether Mr. Henss did any analysis
whatsoever regarding a taxpayer’s duty of consistency. Even if
petitioner or his adviser had performed any credible analysis of
the relevant facts and law, the failure of both petitioner and
his P.C. to report the income shown on petitioner’s 1988 Schedule
K-1 undercuts any argument that petitioner and his adviser acted
reasonably under the circumstances.
On this record, we conclude that petitioner was negligent in
attempting to avoid paying income tax on petitioner’s share of
partnership income. Petitioners have failed to prove their
position was reasonable under the circumstances or that they had
reasonable cause for their failure to report petitioner’s
distributive share of partnership income.
Petitioners also are liable for the addition to tax for
substantial understatement of their tax liability authorized by
section 6661. Section 6661, in effect for returns due in 1988,
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