- 47 -
property, which must be capitalized under section 263A. Because
petitioners did not incur the NOLs they had reported for 1990 and
1991, we hold that petitioners are not entitled to claim NOL
carryforward deductions for 1992 and 1993.
VII. Accuracy-related Penalties
Respondent determined that petitioners were liable for
accuracy-related penalties under section 6662(a) and (b)(1), for
1992 and 1993, for negligence with respect to their entire
underpayment for each year.
Negligence is defined as any failure to make a reasonable
attempt to comply with the provisions of the Internal Revenue
Code. Sec. 6662(c). However, section 6664(c)(1) provides that a
penalty under section 6662 will not be imposed on any portion of
an underpayment if the taxpayer shows reasonable cause for such
portion of the underpayment and that the taxpayer acted in good
faith with respect to such portion. Reliance on the advice of a
professional, such as a certified public accountant, may
constitute a showing of reasonable cause if, under all the facts
and circumstances, such reliance is reasonable and the taxpayer
acted in good faith. Henry v. Commissioner, 170 F.3d 1217, 1219-
1223 (9th Cir. 1999), affg. in part and revg. in part T.C. Memo.
1997-29; Betson v. Commissioner, 802 F.2d 365, 372 (9th Cir.
1986), affg. in part and revg. in part T.C. Memo. 1984-264; sec.
1.6664-4(b)(1), (c), Income Tax Regs. To prove reasonable cause,
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