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Sec. 1.6664-4(b)(1), Income Tax Regs. Relevant factors include
the taxpayer’s efforts to assess his proper tax liability,
including the taxpayer’s reasonable and good faith reliance on
the advice of a tax professional. See id.; see also sec.
1.6664-4(c), Income Tax Regs.
The evidence in this case shows that Carroll and Donna
reasonably and in good faith relied on Silverman’s advice as to
using the collection’s undiscounted value to calculate the
gallery’s COGS. Silverman had had a long relationship with
Carroll and Donna and with the gallery. Carroll, although well
educated, testified that he did not have any special training or
knowledge with respect to the subject of Federal income taxes.
Moreover, Carroll trusted Silverman with the gallery’s books and
records and his personal financial matters. Accordingly, we
believe that Carroll respected Silverman’s judgment when it came
to tax matters and that this trust extended to Silverman’s
explanation of the applicability of the reasoning of Augustus v.
Commissioner, 40 B.T.A. 1201 (1939), to petitioners’ situation.
Therefore, the imposition of a section 6662(a) penalty is not
warranted with respect to Carroll and Donna.
Neither Conrad nor Maria was present at trial, and the
record does not establish whether either of them spoke with
Silverman directly about Augustus. There is evidence, however,
that Silverman met with Conrad’s attorney and discussed the
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