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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). To show good faith reliance, the taxpayer
must show that the return preparer was supplied with all the
necessary information and the incorrect return was a result of the
preparer’s mistakes. Pessin v. Commissioner, 59 T.C. 473, 489
(1972); sec. 1.6664-4(c)(1)(i), Income Tax Regs.
In this case, the understatement of tax is attributable to the
disallowance of the Bitker partnership’s deduction of interest on
petitioners’ individual debt on the farmland they owned. We do not
believe that petitioners reasonably relied on Mr. Mostoller with
respect to this disallowance. The farmland was not shown as an
asset of the Bitker partnership on the partnership return prepared
by Mr. Mostoller. Consequently, we believe Mr. Mostoller knew that
the Bitker partnership did not own any farmland.
Mr. Mostoller verified loan balances by calling Farm Credit
Services. Petitioners have failed to establish, however, that they
furnished Mr. Mostoller with necessary and relevant information to
identify any of the loans as mortgages on their individually owned
farmland. Moreover, petitioners have failed to show that the
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