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testified that he had the correct information to compute the
amounts of the deductions, but he explained that the law
governing these deductions had changed in previous years and that
he had not updated himself on the change. Overall, the evidence
reflects that Mr. Feldmann was provided with all the necessary
information to compute the correct amounts of the depletion
deductions for 1994 and 1995 and that the incorrect amounts
reported on the returns were solely attributable to his failure
to apply the law correctly. Accordingly, we hold that Russell
and Clarice are not liable for the accuracy-related penalties on
the portions of the underpayments attributable to the depletion
deduction adjustments.
For the taxable year 1995, Carolyn provided Mr. Feldmann
with the information regarding IDCs paid by Russell in 1995. A
portion of the IDCs deducted by Russell in 1995 had actually been
reimbursed to him by Ballantyne Oil and Gas, Inc., during that
year. Mr. Feldmann was not informed that Russell had been
reimbursed for approximately $97,790 of those expenses, and he
did not account for the amount reimbursed when he computed the
amount of the IDC deduction. At trial, Russell acknowledged that
he knew that a portion of IDCs was sometimes reimbursed later.
However, Russell claimed that he would not have been aware of any
reimbursement because the amount reimbursed was automatically
deposited in his bank account, and he would not have received a
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