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will substantially exceed the amounts shown on his returns.
Petitioner substantially understated his tax liabilities for 1996
and 1997.
Moreover, petitioner was negligent. He failed to maintain
adequate records of his income and deductions, failed to
substantiate many items claimed on his returns, artificially
reduced his income through the use of sham trusts, and (as is
discussed below in connection with the Court’s consideration of
section 6673(a) sanctions) maintained positions on his returns,
in his petition, and through and after trial of this case that
were frivolous.
Petitioner argues that no accuracy-related penalty should be
imposed because he acted in good faith upon the advice of his tax
advisers. We disagree. While section 6664(c)(1) provides for
relief from penalties where the taxpayer shows good faith and
reasonable cause for the understatement, mere reliance on
advisers is not sufficient to establish good faith and reasonable
cause. Sec. 1.6664-4(b)(1), Income Tax Regs. (“Reliance on * * *
the advice of a professional tax advisor * * * does not
necessarily demonstrate reasonable cause and good faith.”).
Petitioner claims he reasonably relied on Henkell, the
shelter promoter, in creating his trust shelters. Petitioner
states that “there was no adverse information surrounding Robert
Henkell and his extensive trust business at the time Dr. Edwards
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