Jackie H. Hunt - Page 8




                                        - 8 -                                         
               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              






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  Next

Last modified: May 25, 2011