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The negligence penalty does not apply if the taxpayer
establishes that he or she relied in good faith upon the advice
of a competent and experienced accountant or return preparer in
the preparation of the taxpayer’s return. See Weis v.
Commissioner, 94 T.C. 473, 487 (1990). To show good faith
reliance, the taxpayer must show that the return preparer was
supplied with the information necessary for the preparation of an
accurate return. To the extent that errors have been made on the
return, the taxpayer must demonstrate that the errors were the
result of the return preparer’s mistakes. See Pessin v.
Commissioner, 59 T.C. 473, 489 (1972).
We are satisfied that petitioners in good faith reasonably
relied upon their income tax return preparer to properly account
for the transactions between petitioner and PSI that resulted in
the deductions claimed, and now disallowed, on the Schedules C.
Consequently, petitioners are not liable for the negligence
penalty for any year in issue.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be
entered under Rule 155.
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Last modified: May 25, 2011