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Petitioners advance four arguments why they meet the
reasonable cause and good faith exception to the penalty. First,
they contend they relied on the accounting firm to prepare their
return. Reliance on a return preparer may relieve a taxpayer
from the accuracy-related penalty where the taxpayer’s reliance
is reasonable. ASAT, Inc. v. Commissioner, 108 T.C. 147, 176
(1997). Reliance upon expert advice, however, will not exculpate
a taxpayer who supplies the return preparer with incomplete or
inaccurate information. Id.; InverWorld, Inc. v. Commissioner,
T.C. Memo. 1996-301. Because petitioners failed to provide the
accounting firm with the Form 1099-R, this exception to the
accuracy-related penalty does not apply.
Second, petitioners may be arguing that it was reasonable to
misplace the Form 1099-R during the upheaval caused by their move
to Florida in the spring of 2002. Even if the Form 1099-R was
misplaced, unavailability of information does not constitute
reasonable cause. Crocker v. Commissioner, 92 T.C. 899, 913
(1989). This is true even if the taxpayer does not receive an
information document such as a Form 1099-R. See Goode v.
Commissioner, T.C. Memo. 2006-48; Brunsman v. Commissioner, T.C.
Memo. 2003-291 (taxpayer did not need to receive a Form 1099 to
be alerted that he received income). Petitioners received the
Form 1099-R and were aware of the need to report the retirement
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Last modified: May 25, 2011