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C. Whether Petitioners Are Liable for the Accuracy-Related
Penalty
A taxpayer is not liable for the accuracy-related penalty
under section 6662(a) and (b)(1) if there was reasonable cause
for the underpayment and the taxpayer acted in good faith. Sec.
6664(c)(1); sec. 1.6664-4(a), Income Tax Regs. Reliance in good
faith by the taxpayer on the advice of a qualified adviser may
constitute reasonable cause. Sec. 1.6664-4(b)(1), Income Tax
Regs.
Petitioners contend that they are not liable for the
accuracy-related penalty under section 6662(a) and (b)(1) because
they reasonably relied in good faith on Dunning, their C.P.A. and
return preparer.5 Sec. 6664(c)(1). We disagree. Petitioners
could not reasonably have believed that they could use the trusts
to eliminate all of their self-employment tax liabilities for
1997 and 1998 and all or almost all of their Federal income tax
liabilities for those years. Tax benefits of this magnitude
should have caused petitioners to question the validity of the
trust scheme. See Collins v. Commissioner, 857 F.2d 1383, 1386
(9th Cir. 1988), affg. Dister v. Commissioner, T.C. Memo.
1987-217; Gale v. Commissioner, T.C. Memo. 2002-54. In such
cases, taxpayers have a duty to reasonably inquire into the
5 Petitioners contend that respondent bears the burden of
proof under sec. 7491(a). We need not decide which party bears
the burden of proof because the outcome in this case does not
depend on the burden of proof.
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