Theldon and Mary Parrett - Page 8

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          respect to the underpayment.  Sec. 6664(c).  Whether the taxpayer           
          acted with reasonable cause and in good faith is determined by              
          the relevant facts and circumstances.  The most important factor            
          is the extent of the taxpayer's effort to assess the proper tax             
          liability.  Stubblefield v. Commissioner, T.C. Memo. 1996-537;              
          sec. 1.6664-4(b)(1), Income Tax Regs.  Under section 1.6664-                
          4(b)(1), Income Tax Regs., "Circumstances that may indicate                 
          reasonable cause and good faith include an honest                           
          misunderstanding of fact or law that is reasonable in light of              
          all of the facts and circumstances, including the experience,               
          knowledge, and education of the taxpayer."  Moreover, a taxpayer            
          is generally charged with knowledge of the law.  Niedringhaus v.            
          Commissioner, 99 T.C. 202, 222 (1992).  Although a taxpayer is              
          not subject to the addition to tax for negligence where the                 
          taxpayer makes honest mistakes in complex matters, the taxpayer             
          must take reasonable steps to determine the law and to comply               
          with it.  Id.                                                               
               Under certain circumstances, a taxpayer may avoid the                  
          accuracy-related penalty for negligence where the taxpayer                  
          reasonably relied on the advice of a competent professional.                
          Sec. 1.6664-4(b)(1), Income Tax Regs.; see sec. 6664(c); Freytag            
          v. Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d 1011               
          (5th Cir. 1990), affd. 501 U.S. 868 (1991).  Reliance on a                  
          professional adviser, standing alone, is not an absolute defense            

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