-28-
determination is incorrect. Higbee v. Commissioner, supra at
447.
Petitioners failed to keep adequate records related to their
business expenses, claimed highly inflated deductions,
misreported the gain from the sale of the Berlin house, and
failed to report the substantial gain from the sale of the South
Point Road lot. Therefore, respondent has met his burden of
production.
An accuracy-related penalty is not imposed on any portion
of the understatement as to which the taxpayer acted with
reasonable cause and in good faith. Sec. 6664(c)(1). Reliance
on the advice of a tax professional may constitute reasonable
cause and good faith, if under all the facts and circumstances
the reliance is reasonable and in good faith. Neonatology
Associates, P.A. v. Commissioner, 115 T.C. 43, 98 (2000), affd.
299 F.3d 221 (3d Cir. 2002); sec. 1.6664-4(c)(1), Income Tax
Regs. To qualify for this exception, a taxpayer must prove by a
preponderance of the evidence: (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, supra at 98-99.
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