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return over the amount of tax shown on the tax return, sec.
6662(d)(2)(A), and is “substantial” in the case of an individual
if the understatement exceeds the greater of 10 percent of the
tax required to be shown or $5,000, sec. 6662(d)(1)(A).
The penalty under section 6662(a) does not apply to any
portion of an understatement of tax if it is shown that there was
reasonable cause for the taxpayer’s position and that the
taxpayer acted in good faith with respect to that portion. Sec.
6664(c)(1). Reasonable cause requires that the taxpayer exercise
ordinary business care and prudence as to the disputed item. See
United States v. Boyle, 469 U.S. 241 (1985). The good faith
reliance on the advice of an independent, competent professional
as to the tax treatment of an item may meet this requirement.
Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43, 98
(2000), affd. 299 F.3d 221 (3d Cir. 2002); sec. 1.6664-4(b),
Income Tax Regs. To show good faith reliance, the taxpayer must
show that the return preparer was supplied with all the necessary
information and the incorrect return was a result of the
preparer’s mistakes. Neonatology Associates, P.A. v.
Commissioner, supra at 99; Pessin v. Commissioner, 59 T.C. 473,
489 (1972); sec. 1.6664-4(c)(1)(i), Income Tax Regs.
We are convinced that petitioners provided Ms. Young with
all the necessary information concerning the sale of their home
and the cancellation of the second mortgage by Citibank.
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