- 49 -
as an appraiser, attorney, or accountant) constitutes reasonable
cause and good faith if, under all the circumstances, such
reliance was reasonable and the taxpayer acted in good faith.
Sec. 1.6664-4(b)(1), Income Tax Regs. Petitioner bears the
burden of proving that he is not liable for the accuracy-related
penalties determined in the notices of deficiency. See Rule
142(a)(1).
In the notices of deficiency, respondent determined 20-
percent accuracy-related penalties for each of the years in
issue. We agree in part and disagree in part.
For 1992, petitioner is not liable for any accuracy-related
penalty in connection with any portion of the underpayment
attributable to the disallowance of a deduction or reduction for
the attorney’s fees paid to Lurie & Zepeda. Petitioner acted in
good faith and reasonably relied on his professional tax adviser,
Mr. Binder, to properly report the United Ready Mixed settlement,
a complicated transaction affecting multiple tax years.
Petitioner disclosed the United Ready Mixed proceeds reported on
the 1992 Form 1099-MISC as business income on his 1992 individual
return. Mr. Binder advised petitioner that he could offset the
reported income with a cost of goods sold reduction, inasmuch as
petitioner had not actually received the settlement proceeds in
1992. While it was wrong for petitioner to report a cost of
goods sold reduction rather than a section 461(f) deduction (and
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011