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failed to meet the strict requirements of sections 1.6662-3(c)(1)
and (2) and 1.6662-4(f)(1), Income Tax Regs.
Even though petitioner did not make an adequate disclosure
sufficient to avoid the penalty under the applicable regulations,
petitioner may still be relieved of liability for the accuracy-
related penalty if he shows there was reasonable cause for the
understatement and he acted in good faith with respect to the
understatement. See sec. 6664(c); sec. 1.6664-4(a), Income Tax
Regs. We decide whether petitioner acted with reasonable cause
and in good faith after reviewing all the facts and circumstances
and taking into account a variety of factors. See sec. 1.6664-
4(b), Income Tax Regs. The most important factor is the extent
of petitioner’s effort to assess his proper tax liability. See
sec. 1.6664-4(b)(1), Income Tax Regs.
Petitioner contends that he claimed the additional
marketability discount after consultation with his accountant and
that, at all times, he “reasonably relied upon the expertise and
advice of a certified public accountant in the preparation and
filing of” his tax return.25 The only evidence petitioner
25Petitioner also argued that any understatement
attributable to an undervaluation of the Zila stock should be
reduced if (i) the tax treatment is supported by substantial
authority, or (ii) there was adequate disclosure of relevant
facts on his return. See sec. 6662(d)(2)(B). By its terms, and
as indicated by the regulations, the exception in sec.
6662(d)(2)(B) applies only to an accuracy-related penalty imposed
on an underpayment attributable to any substantial understatement
(continued...)
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