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items properly. * * * Negligence is strongly indicated
where--
* * * * * * *
(ii) A taxpayer fails to make a reasonable
attempt to ascertain the correctness of a
deduction * * * on a return which would seem
to a reasonable and prudent person to be “too
good to be true” under the circumstances;
Sec. 1.6662-3(b)(1), Income Tax Regs.
Our finding on reasonableness is strongly influenced by the
experience, knowledge, and education of the taxpayers involved.
See Pratt v. Commissioner, T.C. Memo. 2002-279. Considering that
Ulysses worked as an IRS examiner, and his brother Kai was highly
educated and a long-time real estate investor, the Lees can
hardly argue that they made a reasonable attempt to comply with
the Code or exercise ordinary and reasonable care in preparing
their returns--either in picking a depreciable life for two of
the properties out of thin air, or in figuring out whether they
met the definition of real estate professional in section
469(c)(7) before they filed their returns. Ulysses could have
easily sought advice on passive activities or the taxation of
rental activities from one of his colleagues if he didn’t feel
confident in his own knowledge of the Code and regulations. The
brothers--remarkably sophisticated in tax law and business, and
quite well educated--were also unable to point to any substantial
authority or evidence of good faith reliance on the advice of an
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