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prudent person would do under the circumstances.’” Freytag v.
Commissioner, 89 T.C. 849, 887 (1987) (quoting Marcello v.
Commissioner, 380 F.2d 499, 506 (5th Cir. 1967), affg. on this
issue 43 T.C. 168 (1964) and T.C. Memo. 1964-299), affd. 904 F.2d
1011 (5th Cir. 1990), affd. on other grounds 501 U.S. 868 (1991).
The question then is whether petitioners’ conduct meets the
reasonably prudent person standard. See id.
Petitioner is a lineman for the power company, and his wife
is a brusher with a furniture company. They are not
sophisticated with respect to financial matters. Petitioners’
returns were prepared by a professional tax return preparer. We
have recognized that reliance on the advice of a professional is
a factor to be considered in determining whether a taxpayer uses
reasonable care. See id. at 888. Moreover, while we conclude
that the Schedule C losses are not deductible because the
activity was not entered into for profit, there are factors that
may be viewed as being favorable to petitioners. Accordingly, we
do not sustain the section 6662(a) penalties.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
in accordance with
respondent’s previous Rule 155
computations.
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Last modified: May 25, 2011