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on petitioner’s Schedule C. Petitioner testified credibly at
trial that she engaged the professional services of Ronald Stern,
a C.P.A., to prepare petitioners’ income tax return for 1994.
Mr. Stern had prepared petitioners’ income tax returns for the
past 15 years. According to petitioner, Mr. Stern questioned her
about the legal and professional fees because he wanted to
understand what services the attorneys were performing.
Accordingly, petitioner provided him with information regarding
those expenses.
The characterization of legal fees in this case as either a
Schedule A or a Schedule C deduction involves analyzing and
applying a set of facts to a technical area of the law. Thus, in
the context of determining the correct deduction for legal
expenses that touch both upon a taxpayer’s employment and trade
or business, it is reasonable for a taxpayer to consult and rely
on a C.P.A. Here, petitioners were clearly relying on Mr. Stern
to determine the proper characterization and deduction of the
legal fees. Based on the record we find that petitioners have
proved that their actions with respect to characterizing the
legal fees as Schedule C deductions were reasonable and are not
subject to the section 6662(a) accuracy-related penalty.
Respondent also contends the fact that petitioners claimed
deductions in excess of what they actually substantiated warrants
the imposition of the accuracy-related penalty. Petitioners were
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