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B. Whether Petitioner Is Liable for the Penalty Under Section
6662 for Substantial Understatement
Respondent determined that petitioner is liable for the
accuracy-related penalty for substantial understatement for 1995
and 1996 under section 6662.
The accuracy-related penalty may not apply if the taxpayer
reasonably relied on the advice of a professional, such as an
accountant, and acted in good faith. See sec. 6664(c)(1); sec.
1.6664-4(c), Income Tax Regs. The understatement is reduced to
the extent that it (1) is based on substantial authority, or (2)
is attributable to an item that was adequately disclosed and that
has a reasonable basis. See sec. 6662(d)(2)(B).
Respondent contends that petitioner offered no evidence that
it gave its tax preparer all of the information needed to
correctly prepare its 1995 and 1996 tax returns or that its
preparer and petitioner thoroughly reviewed petitioner’s return
information. We disagree. Petitioner relied on Pearlman,
Nebben, a C.P.A. firm with experience in the health care
industry, to prepare petitioner’s tax returns for the years in
issue. Petitioner has consistently followed a minimum expensing
policy since it was incorporated. Pearlman, Nebben prepared
petitioner’s tax returns for those years, which reasonably led
petitioners to believe that it agreed with petitioner’s minimum
expensing policy. Cf. Bokum v. Commissioner, 94 T.C. 126, 147-
148 (1990) (accountant's failure to sign the tax return should
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