James R. and Myrtice L. Peacock - Page 31

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          the extent that the taxpayer shows that the underpayment is due             
          to the taxpayer’s having reasonable cause and acting in good                
          faith.  Secs. 1.6662-3(a), 1.6664-4(a), Income Tax Regs.                    
               Reasonable cause requires that the taxpayer have exercised             
          ordinary business care and prudence as to the disputed item.                
          United States v. Boyle, 469 U.S. 241 (1985); see also Neonatology           
          Associates, P.A. v. Commissioner, 115 T.C. 43, 98 (2000).  The              
          good faith reliance on the advice of an independent, competent              
          professional as to the tax treatment of an item may meet this               
          requirement.  United States v. Boyle, supra; sec. 1.6664-4(b),              
          Income Tax Regs.  Whether a taxpayer relies on advice and whether           
          such reliance is reasonable hinge on the facts and circumstances            
          of the case and the law applicable thereto.  Sec. 1.6664-                   
          4(c)(1)(i), Income Tax Regs.  The taxpayer must prove that:  (1)            
          The adviser was a competent professional who had sufficient                 
          expertise to justify reliance, (2) the taxpayer provided                    
          necessary and accurate information to the adviser, and (3) the              
          taxpayer actually relied in good faith on the adviser’s judgment.           
          Ellwest Stereo Theatres, Inc. v. Commissioner, T.C. Memo.                   
          1995-610; see also Rule 142(a)(1).                                          
               We are unable to conclude that petitioners have met their              
          burden of proof as to this issue.  First, we are unable to find             
          that petitioners reasonably believed that the fishing activity              
          was actually a business.  Mr. Peacock, a successful                         

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