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with respect to their distributions. For similar reasons, the
Court finds that petitioners did not act with reasonable cause or
basis for their positions. Although the Court does not doubt
that petitioners’ intentions and errors were honest, the
applicable authorities are sufficiently clear to preclude a
finding of reasonable cause. Petitioner’s knowledge, education,
and experience as an attorney should have motivated him to seek
professional tax advice rather than to engage in guesswork with
respect to his return. The Court need not determine whether
petitioners adequately disclosed the facts relating to their
premature distributions or acted in good faith, because the other
requirements for relief from the section 6662 substantial
understatement penalty have not been met.
There is one additional factor to be considered in
connection with this issue. As noted earlier, the 20-percent
accuracy-related penalty under section 6662(a) applies if the
understatement of tax exceeds the greater of $5,000 or 10 percent
of the amount of tax required to be shown on the return. Sec.
6662(d)(1). The amount of tax required to be shown on the return
will be reduced, albeit minimally, by other adjustments in the
Rule 155 computation. If the recalculated tax results in an
amount satisfying section 6662(d)(1), the Court holds that
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