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Reporting losses from a transaction entered into in taxable year
1995 on their 1994 income tax return simply does not demonstrate
that petitioners exercised ordinary care and prudence in
determining their tax obligation.
Petitioners argue that they relied in good faith upon the
tax advice and tax preparation services they received from Mr.
Hoyt and Laguna Tax Service, an entity operated by Mr. Hoyt.
Although Mr. Hoyt was an enrolled agent authorized to practice
before the IRS, any tax advice from either Mr. Hoyt or Laguna Tax
Service cannot be characterized as advice from an independent and
competent tax professional. Rather, such advice is better
classified as sales promotion. See Vojticek v. Commissioner,
T.C. Memo. 1995-444. Since petitioners were required to remit to
the Hoyt cattle operation 75 percent of their tax refunds,
representations made by Mr. Hoyt or Laguna Tax Service would
clearly be self-serving and unreliable. Petitioners did not
consult any competent tax professional from outside the Hoyt
cattle operation.
For the foregoing reasons, we sustain respondent’s
determinations that petitioners are liable for accuracy-related
penalties for 1994 and 1995.
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