-21-
second opinion. See id. (such a requirement would nullify the
purpose of seeking the advice of an expert in the first place).
Furthermore, the cases on whether a taxpayer realized gain on the
stock purchased with third-party margin debt had yet to be
litigated at the time petitioners filed the return for 2000.
There was therefore no definitive authority to guide petitioners
on whether they could exclude approximately $16.9 million of gain
from stock acquired with third-party margin debt. Because the
issue, at the time they filed their return, was novel, we find
that petitioners had reasonable cause and acted in good faith in
excluding the gain when they filed their return. See Williams v.
Commissioner, 123 T.C. 144 (2004) (declining to impose a penalty
involving issue of first impression and the interrelationship
between complex tax and bankruptcy laws). We do not find
subsequent adverse caselaw to be relevant in considering whether
petitioners had reasonable cause and acted in good faith with
respect to the understatement when they filed their return.15
We find, therefore, that petitioners have carried their
burden that they had reasonable cause and acted in good faith to
15The mere fact that we held against petitioners on the
substantive issue does not, in and of itself, require holding for
respondent on the penalty. See Hitchins v. Commissioner, 103
T.C. 711, 719-720 (1994) (“Indeed, we have specifically refused
to impose * * * [a penalty] where it appeared that the issue was
one not previously considered by the Court and the statutory
language was not entirely clear.”).
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