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C. Petitioners’ Third Theory
Section 6664(c)(1) provides an exception to the section
6662(a) accuracy-related penalty where the taxpayer shows
reasonable cause for, and that the taxpayer acted in good faith
with respect to, any portion of the underpayment. See also sec.
1.6664-4(a), Income Tax Regs. We determine reasonable cause and
good faith on a case-by-case basis, taking into account all
pertinent facts and circumstances. Sec. 1.6664-4(b)(1), Income
Tax Regs. The most important factor is the extent of the
taxpayer’s effort to assess the proper tax liability. Id.
One application of this exception is to a taxpayer’s
reasonable reliance in good faith on the advice of an independent
professional adviser as to the tax treatment of an item. United
States v. Boyle, 469 U.S. 241, 250 (1985); sec. 1.6664-4(b)(1),
Income Tax Regs. The taxpayer must show that (1) the adviser was
a competent professional who had sufficient expertise to justify
the taxpayer’s reliance on him, (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.
See Sklar, Greenstein & Scheer, P.C. v. Commissioner, 113 T.C.
135, 144-145 (1999).
As to the first requirement, respondent has not attacked the
competence or expertise of Mr. Stienessen, petitioners’
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