Jerry L. and Valerie J. Hill - Page 7

          241 (1985); sec. 1.6664-4(b), Income Tax Regs., individual                  
          taxpayers relying upon this exception must prove by a                       
          preponderance of evidence:  (1) The adviser was a competent                 
          professional who had sufficient expertise to justify reliance;              
          (2) the taxpayer provided necessary and accurate information to             
          the adviser; and (3) the taxpayer actually relied in good faith             
          on the adviser’s judgment, Neonatology Associates, P.A. v.                  
          Commissioner, 115 T.C. 43, 99 (2000), affd. 299 F.3d 221 (3d Cir.           
          2002); Ellwest Stereo Theatres, Inc. v. Commissioner, T.C. Memo.            
          1995-610; see also Rule 142(a)(1).  On the basis of the credible            
          evidence in the record, which we do not find includes the                   
          testimony of Hill, we are unable to conclude that each of these             
          requirements has been met.  To say the least, Hill is a                     
          college-educated individual who for many years has known about              
          his obligation to pay Federal income taxes on the income                    
          generated from his services, yet neither he nor his wife ever               
          consulted a competent professional concerning the Federal income            
          tax consequences of Re-Cap Trust, which, according to their                 
          reporting position, now conceded by them to be wrong, allowed               
          them to deduct otherwise nondeductible personal expenses and                
          ultimately pay only $1,279 of income taxes ($1,024 + $255) on               
          $332,085 of personal service income ($332,520 - $435).  We                  
          sustain respondent’s determination as to the accuracy-related               

Page:  Previous  1  2  3  4  5  6  7  8  Next

Last modified: May 25, 2011