- 45 -
defense, but it is a factor to be considered. Freytag v.
Commissioner, supra at 888.
In order for this factor to be given dispositive weight, the
taxpayer claiming reliance on a professional must show, at
minimum: “(1) The adviser was a competent professional who had
sufficient expertise to justify reliance, (2) the taxpayer
provided necessary and accurate information to the adviser, and
(3) the taxpayer actually relied in good faith on the adviser’s
judgment.” Neonatology Associates, P.A. v. Commissioner, 115
T.C. 43, 99 (2000), affd. 299 F.3d 221 (3d Cir. 2002); see also,
e.g., Charlotte’s Office Boutique, Inc. v. Commissioner, 425 F.3d
1203, 1212 & n.8 (9th Cir. 2005) (quoting verbatim and with
approval the above three-prong test), affg. 121 T.C. 89 (2003);
Westbrook v. Commissioner, 68 F.3d 868, 881 (5th Cir. 1995),
affg. T.C. Memo. 1993-634; Cramer v. Commissioner, 101 T.C. 225,
251 (1993), affd. 64 F.3d 1406 (9th Cir. 1995); Ma-Tran Corp. v.
Commissioner, 70 T.C. 158, 173 (1978); Pessin v. Commissioner, 59
T.C. 473, 489 (1972); Ellwest Stereo Theatres of Memphis, Inc. v.
Commissioner, T.C. Memo. 1995-610.
As previously indicated, section 7491(c) places the burden
of production on the Commissioner. The notice of deficiency
issued to petitioners asserted applicability of the section
6662(a) penalty on account of both negligence and/or substantial
understatement. See sec. 6662(b). Respondent on brief likewise
Page: Previous 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 Next
Last modified: November 10, 2007