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deficiency, the Commissioner does not specify why he imposed the
penalty, but there are only two possibilities: (1) negligence;
or (2) a substantial understatement.
Part of this penalty will disappear with the portion of the
underpayment traceable to the cash purchases that we have
allowed. Section 6664 may provide a defense to the remainder--
under either the negligence or substantial understatement
theory--“if it is shown that there was a reasonable cause * * *
and that the taxpayer acted in good faith.” Sec. 6664(c)(1).
The regulations issued under this section require that our
analysis be conducted “on a case-by-case basis, taking into
account all pertinent facts and circumstances.” Sec. 1.6664-
4(b), Income Tax Regs.
The crucial fact here is that the Coxes relied in good faith
on Spiller to correctly prepare their tax return based on the
financial records and receipts they gave him. This was
reasonable--he was a former IRS auditor, and had competently done
their taxes in the past before his evidently rapid decline and
death. While a taxpayer cannot hide behind a tax preparer or
adviser, we have often held that a taxpayer who supplies his
preparer with accurate information relating to the return is not
negligent in relying upon the preparer’s advice. Kurzet v.
Commissioner, T.C. Memo. 1997-54, affd., revd., and remanded on
other issues, 222 F.3d 830 (10th Cir. 2000). We do not fault the
Coxes for the errors on their return when the mistakes stemmed
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