Bert LaRue and Michelle Nolen - Page 6




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               When petitioners' returns were thereafter audited by                   
          respondent, all correspondence they received was referred to Mr.            
          Beltran, who had promised he "would take care of it".  There is             
          no indication in the record that Mr. Beltran provided any                   
          assistance to petitioners in the audit process.3                            
               Petitioners contend they should be absolved of liability for           
          the section 6662(a) penalties because they relied on the                    
          representations of their return preparer.                                   
               Section 6662(a) provides for an accuracy-related penalty               
          equal to 20 percent of any portion of an underpayment of tax                
          required to be shown on the return that is attributable to the              
          taxpayer's negligence or disregard of rules or regulations.  Sec.           
          6662(a) and (b)(1).  Negligence consists of any failure to make a           
          reasonable attempt to comply with the provisions of the Internal            
          Revenue Code and disregard consists of any careless, reckless, or           
          intentional disregard.  Sec. 6662(c).  The courts have refined              
          the Code definition of negligence as a lack of due care or                  
          failure to do what a reasonable and prudent person would do under           
          similar circumstances.  Allen v. Commissioner, 925 F.2d 348, 353            
          (9th Cir. 1991), affg. 92 T.C. 1 (1989).  Section 1.6662-3(b)(1),           
          Income Tax Regs., provides that "Negligence is strongly indicated           


               3    This case is one of numerous cases heard by the Court             
          involving tax returns prepared by Mr. Beltran, which essentially            
          involve the same deductions.  At some point in the audit process,           
          Mr. Beltran ceased all communications with his former clients.              




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