- 22 -
A taxpayer may avoid liability for negligence under section
6653(a)(1) and (2) if he or she reasonably relied on competent
professional advice. United States v. Boyle, 469 U.S. 241, 250-
251 (1985); Freytag v. Commissioner, 89 T.C. 849, 888 (1987),
affd. 904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991).
Reliance on professional advice, standing alone, is not an
absolute defense to negligence but rather a factor to be
considered. Freytag v. Commissioner, supra. For reliance on
professional advice to excuse a taxpayer from the negligence
additions to tax, the taxpayer must show that the professional
had the expertise and knowledge of the pertinent facts to provide
informed advice on the subject matter. David v. Commissioner, 43
F.3d 788, 789-790 (2d Cir. 1995), affg. T.C. Memo. 1993-621;
Goldman v. Commissioner, supra at 408; see Freytag v.
Commissioner, supra; Sann v. Commissioner, T.C. Memo. 1997-259.
Reliance on representations by insiders, promoters, or
offering materials has been held an inadequate defense to
negligence. Goldman v. Commissioner, supra; Sann v.
Commissioner, supra; see Berry v. Commissioner, T.C. Memo. 2001-
311; Carroll v. Commissioner, T.C. Memo. 2000-184. Pleas of
reliance have been rejected when neither the taxpayer nor the
advisers purportedly relied upon by the taxpayer knew anything
about the nontax business aspects of the contemplated venture.
See David v. Commissioner, supra; Goldman v. Commissioner, supra.
Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NextLast modified: May 25, 2011