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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."
The deficiencies in this case, except for the nominal
unreported interest income amounts, are solely attributable to
the actions of Allan in not providing to petitioner's income tax
return preparer, an accountant, all the sources of receipts of
petitioner's business income. In addition, Allan was addicted to
drugs, although the Court acknowledges that the deficiencies
determined by respondent do not include income that was diverted
by Allan to sustain his drug habit. Nonetheless, the Court is
satisfied from the evidence that petitioner was not aware of the
problem with Allan and was unaware that Allan was under reporting
the gross receipts of the funeral home to petitioner's return
preparer. Not until petitioner's returns were examined by
respondent did petitioner learn that substantial amounts of his
income were being diverted by Allan for his drug addiction, and
that Allan was not providing the correct gross receipts
information to the return preparer. Petitioner acknowledged at
trial that, after the 1996 and 1997 returns were prepared, his
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