-5-
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 that: (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.
Petitioners contend that their reliance on attorneys Kallman
and Carter relieves them from the accuracy-related penalties. We
disagree. Respondent has not disputed that petitioners satisfied
part (2) of the 3-prong test. Accordingly, the issue to be
determined is whether petitioners actually relied in good faith
on the advice of competent tax professionals possessing
sufficient expertise to justify their reliance.
In 2001, petitioners consulted Mr. Kallman, an attorney with
24 years’ experience regarding the trusts. Mr. Kallman does not
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