Michael G. Harvey and Penny B. Harvey - Page 9




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          due on the portion of the underpayment attributable to negligence           
          or intentional disregard of rules or regulations.                           
               Negligence is defined as “lack of due care or failure to do            
          what a reasonable and prudent person would do under similar                 
          circumstances.”  Anderson v. Commissioner, 62 F.3d 1266, 1271               
          (10th Cir. 1995), affg. T.C. Memo. 1993-607.  Petitioners argue             
          that Mr. Harvey was not negligent because he relied on the advice           
          of a professional, Mr. Peterson.  Reliance on professional advice           
          may be a defense to the negligence penalties.  See id.  The                 
          advice must be from competent and independent parties, not from             
          the promoters of the investment.  See LaVerne v. Commissioner, 94           
          T.C. 637, 652 (1990), affd. without published opinion sub nom.              
          Cowles v. Commissioner, 949 F.2d 401 (10th Cir. 1991), affd.                
          without published opinion 956 F.2d 274 (9th Cir. 1992); Rybak v.            
          Commissioner, 91 T.C. 524, 565 (1988).  We hold that petitioner’s           
          reliance on any advice2 from Mr. Peterson was not reasonable                
          because it was not from an independent source.  As such, this               
          reliance cannot be a defense to negligence.                                 







          2The advice petitioner received from Mr. Peterson was                       
          apparently only in the context of Mr. Peterson’s preparation of             
          petitioners’ tax return.  Mr. Harvey testified that he never                
          discussed the tax implications of the investment with Mr.                   
          Peterson.                                                                   





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