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adequate disclosure of the relevant facts and a reasonable basis
for its treatment. Sec. 6662(d)(2)(B). There is no dispute that
the understatement of tax in this case meets this threshold. The
issue, however, is whether petitioner had reasonable cause for
the understatement and acted in good faith with respect to the
understatement.
The determination of whether a taxpayer acted with
reasonable cause and in good faith is made on a case-by-case
basis. Sec. 1.6664-4(b), Income Tax Regs. The most important
factor is the extent of the taxpayer’s effort to assess the
taxpayer’s proper tax liability. An honest misunderstanding of
fact or law that is reasonable in light of the experience,
knowledge, and education of the taxpayer may indicate reasonable
cause and good faith. Remy v. Commissioner, T.C. Memo. 1997-72.
Further, reliance by the taxpayer on the advice of a qualified
adviser constitutes reasonable cause and good faith, if, under
all of the facts and circumstances, the reliance by the taxpayer
was reasonable and the taxpayer acted in good faith. Sec.
1.6664-4(b), Income Tax Regs. Petitioner here did not consult
with a tax adviser.
Petitioner is an accountant. His position is that, because
he acquired the bonds by inheritance, he, therefore, had a
“stepped-up” basis for the bonds, which basis would include the
accrued interest. That rationale, however, has no bearing or
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