- 26 -
those were issues that, in fact, were being raised
wholly or in part in this case.
We agree with Ms. Cochran that the example presents circumstances
similar to those in petitioners’ case.
Petitioners are correct in asserting that not all of the
facts in their case are present in the example. However, it is
unreasonable to expect that facts in an example be identical to
facts of a particular case before the example can be relied upon.
The IRM example was only one of many factors respondent
considered. Given the similarities to petitioners’ case,
respondent’s reliance on that example was not arbitrary or
capricious.
3. Petitioners’ Other “Equitable Facts”
Petitioners argue that respondent abused his discretion by
failing to consider the other “equitable facts” of this case.
Petitioners’ “equitable facts” include reference to: (1)
Petitioners’ reliance on Bales v. Commissioner, T.C. Memo. 1989-
568;12 (2) petitioners’ reliance on Hoyt’s enrolled agent status;
12 Bales v. Commissioner, T.C. Memo. 1989-568, involved
deficiencies determined against various investors in several Hoyt
partnerships. This Court found in favor of the investors on
several issues, stating that “the transaction in issue should be
respected for Federal income tax purposes.” Taxpayers in many
Hoyt-related cases have used Bales as the basis for a reasonable
cause defense to accuracy-related penalties. This argument has
been uniformly rejected by this Court and by the Courts of
Appeals for the Sixth, Ninth, and Tenth Circuits. See, e.g.,
Hansen v. Commissioner, 471 F.3d 1021 (9th Cir. 2006), affg. T.C.
Memo. 2004-269; Mortensen v. Commissioner, 440 F.3d 375, 390-391
(continued...)
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011