Steven L. and Laura J. Chambers - Page 13




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          circumstances.  The most important factor is the extent of the              
          taxpayer's effort to assess the proper tax liability.                       
          Stubblefield v. Commissioner, T.C. Memo. 1996-537; sec. 1.6664-             
          4(b)(1), Income Tax Regs.  Under section 1.6664-4(b)(1), Income             
          Tax Regs., "Circumstances that may indicate reasonable cause and            
          good faith include an honest misunderstanding of fact or law that           
          is reasonable in light of all of the facts and circumstances,               
          including the experience, knowledge, and education of the                   
          taxpayer."  Moreover, a taxpayer is generally charged with                  
          knowledge of the law.  Niedringhaus v. Commissioner, 99 T.C. 202,           
          222 (1992).  Although a taxpayer is not subject to the addition             
          to tax for negligence where the taxpayer makes honest mistakes in           
          complex matters, the taxpayer must take reasonable steps to                 
          determine the law and to comply with it.  Id.                               
               Under certain circumstances, a taxpayer may avoid the                  
          accuracy-related penalty for negligence where the taxpayer                  
          reasonably relied on the advice of a competent professional.                
          Sec. 1.6664-4(b)(1), Income Tax Regs.; see sec. 6664(c); Freytag            
          v. Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d 1011               
          (5th Cir. 1990), affd. 501 U.S. 868 (1991).  However, reliance on           
          a professional adviser, standing alone, is not an absolute                  
          defense to negligence; it is only one factor to be considered.              
          In order for reliance on a professional adviser to relieve a                
          taxpayer from the negligence penalty, the taxpayer must establish           





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