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understatement that was attributable to the tax treatment of an
item where: (1) The taxpayer had substantial authority for his
position; or (2) the taxpayer had a reasonable basis for his
position, and he disclosed the relevant facts affecting that item
on his return. Sec. 6662(d)(2)(B). Petitioners argue that, in
accordance with Griswold and Rev. Rul. 58-5, supra, they had
substantial authority and a reasonable basis for their treatment
of the legal fees. As discussed above, neither authority
provides support for petitioners’ contention that petitioner, as
a professional fiduciary, could never be an employee. Likewise,
neither authority provides support for petitioners’ treatment of
the legal fees.
The accuracy-related penalty is not imposed with respect to
any portion of an underpayment if the taxpayer can establish he
acted with reasonable cause and in good faith. Sec. 6664(c)(1).
Reliance upon the advice of a professional may demonstrate a
taxpayer acted with reasonable cause and in good faith.
Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43, 98-99
(2000), affd. 299 F.3d 221 (3d Cir. 2002); Freytag v.
Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d 1011 (5th
Cir. 1990), affd. 501 U.S. 868 (1991); see sec. 1.6664-4(c)(1),
Income Tax Regs. However, a taxpayer’s reliance upon the advice
of a professional does not automatically constitute reasonable
cause. Neonatology Associates, P.A. v. Commissioner, supra at
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