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Negligence is defined to include “any failure to reasonably
attempt to comply with the tax code, including the lack of due
care or the failure to do what a reasonable or ordinarily prudent
person would do under the circumstances.” Chamberlain v.
Commissioner, 66 F.3d 729, 732 (5th Cir. 1995), affg. in part and
revg. in part T.C. Memo. 1994-228. Generally, courts look both
to the underlying investment and to the taxpayer’s position taken
on the return in evaluating whether a taxpayer was negligent.
See Sacks v. Commissioner, 82 F.3d 918, 920 (9th Cir. 1996),
affg. T.C. Memo. 1994-217. However, the Court of Appeals for the
Fifth Circuit, to which appeal lies in this case, has held that
the proper inquiry in negligence cases is whether the taxpayer
was reasonable in claiming the loss. See Reser v. Commissioner,
112 F.3d 1258, 1271 (5th Cir. 1997), affg. in part and revg. in
part T.C. Memo. 1995-572; Durrett v. Commissioner, 71 F.3d 515,
518 (5th Cir. 1996), affg. in part and revg. in part T.C. Memo.
1994-179; Chamberlain v. Commissioner, supra at 733. We will
therefore focus on the reasonableness of petitioner’s claiming
the loss on her return. Petitioner argues that she was not
negligent because she relied on the advice of professionals--Mr.
Meinke and Mr. Mussina--in claiming the loss.
Good faith reliance on professional advice concerning tax
laws is a defense to the negligence penalties. See Chamberlain
v. Commissioner, supra at 732. The advice must be objectively
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