- 28 -
good faith with respect to such portion.” “The determination of
whether a taxpayer acted with reasonable cause and in good faith
is made on a case-by-case basis, taking into account all
pertinent facts and circumstances.” Sec. 1.6664-4(b)(1), Income
Tax Regs. The extent of the taxpayer’s effort to ascertain his
proper tax liability is generally the most important factor. Id.
A. Petitioner’s Investigation and Reliance on Others
Good faith reliance on professional advice concerning tax
laws may be a defense to the negligence penalties. United States
v. Boyle, 469 U.S. 241, 250-251 (1985); see also sec. 1.6664-
4(b)(1), Income Tax Regs. However, “Reliance on professional
advice, standing alone, is not an absolute defense to negligence,
but rather a factor to be considered.” Freytag v. Commissioner,
89 T.C. 849, 888 (1987), affd. 904 F.2d 1011 (5th Cir. 1990),
affd. 501 U.S. 868 (1991). In order to be considered as such,
the reliance must be reasonable. Id. To be objectively
reasonable, the advice generally must be from competent and
independent parties unburdened with an inherent conflict of
interest, not from the promoters of the investment. Goldman v.
Commissioner, 39 F.3d 402, 408 (2d Cir. 1994), affg. T.C. Memo.
1993-480; LaVerne v. Commissioner, 94 T.C. at 652; Rybak v.
Commissioner, 91 T.C. 524, 565 (1988); Edwards v. Commissioner,
T.C. Memo. 2002-169. Furthermore, the taxpayer must show that
any expert rendering an opinion with respect to an investment had
Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: May 25, 2011