- 18 -
time. It is possible that petitioner could have recovered her
investment at the time of Mr. Alfano's advice. If so, she might
have been in constructive or actual receipt of her investment and
the CNC distributions. See Wright v. Commissioner, T.C. Memo.
1989-557. Had petitioner recovered her investment, Mr. Alfano
may have advised taking a different return position. Petitioner
failed to heed Mr. Alfano's advice, left him with the impression
that she had attempted and failed to have her investment
refunded, and invested additional funds in the pyramid scheme.
She apparently made no attempt to find out any further
information about her invested funds or CNC other than that it
had an office with a desk and a computer.
The Court finds that petitioner failed reasonably to attempt
to comply with the tax code and regulations. Her actions
evidence a lack of due care or the failure to do what a
reasonable or ordinarily prudent person would do under the
circumstances. See Chamberlain v. Commissioner, supra.
Conclusion
We hold that petitioner is not liable for the fraud
penalties under section 6663(a) but is liable for the accuracy-
related penalties under section 6662(a) for negligence or
intentional violation of rules or regulations for 1991 and 1992.
We hold that respondent's determination that the underpayment of
tax for the year 1994 is due to fraud is correct, and petitioner
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