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underpayment attributable to these items upon which to premise an
accuracy-related penalty. We hold that DPC is not liable under
section 6662(a).
With respect to the individual members of the Deitsch family
(again other than B. Mayer Zeiler, whose penalty liability has
been settled by stipulation), petitioners seek to defend against
the imposition of section 6662(a) penalties on the grounds of
preparer reliance. They maintain that reliance upon their
accountant demonstrates the requisite reasonable cause and good
faith to relieve them of negligence and to render applicable the
section 6664(c) exception. We, however, disagree.
Even if we accept the uncorroborated testimony that
petitioners informed Mr. Valentino the payments from FIL were
distributions of earnings and profits, the record at best
reflects that Mr. Valentino was supplied with inconsistent and
contradictory information. Mr. Valentino was faced with written
documents, namely FIL’s financial statements, reflecting one
characterization and with oral assertions reflecting another. In
addition, the discrepancies between years and among petitioners
indicate that petitioners’ representations may have at times been
incomplete or even conflicting. Moreover, there is no evidence
whatsoever that petitioners provided Mr. Valentino with facts
underlying the FIL transactions that would have enabled him to
make an independent decision regarding their actual nature.
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