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The accuracy-related penalty under section 6662(a) does not
apply to any portion of an underpayment, however, if it is shown
that there was reasonable cause for, and that the taxpayer acted
in good faith with respect to, that portion. Sec. 6664(c)(1);
sec. 1.6664-4(b), Income Tax Regs. The determination of whether
the taxpayer acted with reasonable cause and in good faith
depends on the pertinent facts and circumstances, including the
taxpayer’s efforts to assess his or her proper tax liability, the
knowledge and experience of the taxpayer, and the reliance on the
advice of a professional. Sec. 1.6664-4(b)(1), Income Tax Regs.
Petitioner argues that she is not liable for the accuracy-
related penalty because she relied upon the advice of her
attorney to exclude the $58,000 amount. While the Commissioner
bears the burden of production under section 7491(c), the
taxpayer bears the burden of proof with regard to issues of
reasonable cause, substantial authority, or similar provisions.
Higbee v. Commissioner, supra at 446. Therefore, petitioner must
show that she supplied her adviser with all the correct and
necessary information and that her error in not reporting the
$58,000 amount was the result of her adviser’s mistake.
In the instant case, petitioner’s attorney represented her
during all stages of the lawsuit, including filing the complaint
and negotiating the settlement agreement. Furthermore, the
attorney endorsed and deposited the two checks Liberty made
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Last modified: May 25, 2011