- 23 -
light of the experience, knowledge, and education of the taxpayer
may indicate reasonable cause and good faith. See Remy v.
Commissioner, T.C. Memo. 1997-72.
Petitioners assert that they acted with reasonable cause and
in good faith when they reported the ranching and farming losses,
the St. John rental property expenses, and the noncash charitable
contributions. The determination of whether petitioners engaged
in their ranching and farming activities for profit involves a
difficult factual question. See, e.g., Wesinger v. Commissioner,
T.C. Memo. 1999-372; Arrington v. Commissioner, T.C. Memo. 1983-
673. Petitioners maintained various receipts, invoices, and
canceled checks for their claimed expenses and employed an
accountant to prepare their tax returns and advise them. Their
accountant testified at trial that he represented other ranchers
and farmers in Texas and that petitioners provided him enough
information to report their ranching and farming activities. We
are not persuaded that their reliance on the accountant was less
than reasonable. Accordingly, we find that petitioners acted
with reasonable cause and in good faith, and, therefore, the
accuracy-related penalties attributable to the losses from the
ranching and farming activities do not apply.
Petitioners, however, have failed to provide a reasonable
explanation why we should not sustain the accuracy-related
penalties with regard to the deductions of the St. John rental
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011