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Petitioner argues:
Hoyt made certain that Petitioner was aware of outside
counsel by referencing outside counsel in newsletters
and other documents * * *. Hoyt made certain that
Petitioner (and other Hoyt investors) were aware that
Mr. MacDonald and Mr. Dismukes were the attorneys who
had won Bales * * *. In light of Petitioner’s lack of
sophistication, his reliance on the tax professionals
that won the Bales case is even more understandable.
Therefore, the negligence penalty is also inappropriate
due to Petitioner[’s] reasonable reliance on the Hoyt
outside advisors.
Whether or not petitioner was aware that Hoyt had “outside
advisors”, there is no evidence that petitioner sought or
received advice directly from these “outside advisors”. The
advisors were hired by Hoyt, and any advice that petitioner may
have received from them was filtered through Hoyt.
Petitioner testified that he did not seek advice from tax
attorneys or accountants outside of the Hoyt organization.
Petitioner’s reliance on Hoyt, Laguna, and persons hired by Hoyt,
coupled with his failure to seek independent advice, was
unreasonable.
b. Honest Misunderstanding of Fact
Reasonable cause and good faith under section 6664(c) may be
indicated where there is “an honest misunderstanding of fact or
law that is reasonable in light of all the facts and
circumstances, including the experience, knowledge and education
of the taxpayer.” Sec. 1.6664-4(b)(1), Income Tax Regs.
However, “reasonable cause and good faith is not necessarily
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