- 51 -
We have previously held that a taxpayer’s adoption of a
“flagrant tax avoidance scheme” repeatedly rejected by the courts
is patently negligent. Wesenberg v. Commissioner, 69 T.C. 1005,
1015 (1978); see also Hanson v. Commissioner, T.C. Memo. 1981-
675. Respondent has produced ample evidence to demonstrate that
the trusts were created for the purpose of tax avoidance and that
they lacked economic substance. In addition, when the Gouveias
created the trusts, we had already considered several cases
involving abusive business trusts and determined that the trusts
would not be respected for Federal income tax purposes. See
Zmuda v. Commissioner, 79 T.C. 714 (1982); Markosian v.
Commissioner, 73 T.C. 1235 (1980); Schneider v. Commissioner,
T.C. Memo. 1987-560; Hanson v. Commissioner, supra.
The Gouveias argue that the penalty should not be imposed
because they had reasonable cause for the underpayment, and they
acted in good faith by relying on advice from accountants and tax
return preparers. Section 6664(c)(1) provides that the section
6662 accuracy-related penalty shall not be imposed with respect
to any portion of any underpayment if it is shown that a taxpayer
acted in good faith and that there was reasonable cause for the
underpayment. In determining whether a taxpayer acted in good
faith, we consider the taxpayer’s knowledge and experience, the
taxpayer’s reliance, if any, on the advice of well-informed and
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