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As to petitioners’ second argument, section 6664(c)(1)
provides a defense against the accuracy-related penalty with
respect to any portion of an underpayment if the taxpayer shows
that there was reasonable cause for such portion and that the
taxpayer acted in good faith with respect to such portion.
Reliance on professionals may satisfy the reasonable cause and
good faith elements of section 6664(c)(1) if taxpayers show by a
preponderance of the evidence that the professional was a
competent professional who had sufficient expertise to justify
reliance, the taxpayer gave the adviser all necessary and
accurate information, and the taxpayer actually relied in good
faith on the adviser’s judgment. Neonatology Associates, P.A. v.
Commissioner, 115 T.C. 43, 99 (2000).
Based on all the pertinent facts and circumstances, section
1.6664-4(b)(1), Income Tax Regs., we find petitioners have failed
to establish that there was reasonable cause for any portion of
the understatements in these cases or that they acted with any
measure of good faith. Sec. 6664(c)(1). Among other reasons,
John Cordes, Eddy Ben Cordes, and CFC have not established that
they provided Robert Hinman, their financial adviser/return
preparer, with all the necessary and accurate information or that
Mr. Hinman advised them on any reporting positions. Petitioners
seemed to rely on Mr. Hinman, if at all, solely because he was a
certified public accountant known and recommended by Mr. Cordes.
John Cordes testified that “I don’t really recall what
specifically was on * * * [the 1995 tax return], what Robert
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