Charles R. and Dru L. Haggart - Page 7

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               The disallowed deductions and costs of goods sold in 1996              
          and 1997 with respect to Mr. Haggart’s Schedules C business were            
          claimed by petitioners without any documentation or explanation.            
          In short, these items appear to have been totally fictitious.               
          Accordingly, petitioners’ underpayments were, at best,                      
          attributable to negligence.                                                 
               Petitioners attempt to deflect the accuracy-related                    
          penalties on the ground that they relied on the advice of their             
          accountant.  Generally, a taxpayer may avoid the imposition of              
          the accuracy-related penalty if “there was a reasonable cause               
          * * * and that the taxpayer acted in good faith”.  Sec. 6664(c).            
          Whether the taxpayer acted with reasonable cause and in good                
          faith is determined by the relevant facts and circumstances and,            
          most importantly, the extent to which the taxpayer attempted to             
          assess the proper tax liability.  See Neely v. Commissioner, 85             
          T.C. 934 (1985); Stubblefield v. Commissioner, T.C. Memo. 1996-             
          537; sec. 1.6664-4(b)(1), Income Tax Regs.                                  
               Reliance on the advice of a competent adviser can be a                 
          defense to the accuracy-related penalty.  See United States v.              
          Boyle, 469 U.S. 241, 250 (1985).  But, reliance on professional             
          advice is not automatically a defense to negligence.  Freytag v.            
          Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d 1011 (5th             
          Cir. 1990), affd. 501 U.S. 868 (1991); see also sec. 1.6664-                
          4(c)(1), Income Tax Regs.  The taxpayer must establish, inter               

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