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thereby give the trusts a “stepped-up” basis upon which to take
additional depreciation deductions. Nor could he have reasonably
believed he could successfully use the trusts to come close to
zeroing out his taxable income and his Federal income tax
liabilities. At a minimum, advice to that effect would cause a
reasonable person to seek independent confirmation from a
reliable and disinterested adviser. Moreover, in the case at
hand, petitioner continued to assert the validity of his trusts
long after he learned of the invalidity of Henkell’s trust
schemes.
Petitioner also argues that respondent committed a “misdeed”
by determining deficiencies substantially in excess of the
amounts that ultimately will be redetermined, and that
respondent’s “misdeed” should mitigate petitioner’s liability for
penalties. Petitioner cites no authority for his argument. It
is dead wrong and has no basis in fact or law. Petitioner failed
to maintain and to produce to respondent, in response to
respondent’s proper requests, records to substantiate his income
and expenses. Respondent did not commit a “misdeed” in
reconstructing petitioner’s income and disallowing his deductions
after petitioner failed to produce proper records to support his
return positions. We uphold respondent’s determinations that
petitioner is liable for accuracy-related penalties under section
6662(a).
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