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would seem to a reasonable and prudent person to be 'too good to
be true' under the circumstances." An exception applies when the
taxpayer demonstrates (1) there was reasonable cause for the
underpayment, and (2) the taxpayer acted in good faith with
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), "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.; sec. 6664(c); Freytag v.
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