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whether a taxpayer acted with reasonable cause and in good faith
within the meaning of section 6664(c)(1) is made on a case-by-
case basis, taking into account all the pertinent facts and
circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. The most
important factor is the extent of the taxpayer’s effort to assess
his proper tax liability for the year. Id. Section 1.6664-
4(b)(1), Income Tax Regs., specifically provides: “Circumstances
that may indicate reasonable cause and good faith include an
honest misunderstanding of fact or law that is reasonable in
light of * * * the experience, knowledge and education of the
taxpayer.” See Neely v. Commissioner, supra. Reliance by the
taxpayer on the advice of a qualified adviser will constitute
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)(1), Income
Tax Regs.
We consider “the reasonableness of the taxpayer’s actions in
light of his experience and the nature of the investment.”
Fawson v. Commissioner, T.C. Memo. 2000-195; see also Henry
Schwartz Corp. v. Commissioner, 60 T.C. 728, 740 (1973); Greene
v. Commissioner, T.C. Memo. 1998-101, affd. without published
opinion 187 F.3d 629 (4th Cir. 1999); Glassley v. Commissioner,
T.C. Memo. 1996-206. Whether a taxpayer is negligent in claiming
a tax deduction “depends upon both the legitimacy of the
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Last modified: May 25, 2011