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portion of an underpayment if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted in
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. Reliance on the Hoyt Organization and Edward Van Scoten
Petitioners first argue that they should escape the
negligence penalty because they relied in good faith on various
individuals with respect to the Hoyt investment: Mr. Hoyt and
other members of the Hoyt organization, tax professionals hired
by the Hoyt organization, and Mr. Van Scoten’s father, Edward Van
Scoten.
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
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