-34-
(2000), affd. 299 F.3d 221 (3d Cir. 2002); sec. 1.6664-4(c)(1),
Income Tax Regs.; see also Catalano v. Commissioner, 240 F.3d
842, 845 (9th Cir. 2001), affg. T.C. Memo. 1998-447. Reasonable
cause and good faith also may be found where a position taken on
a return involves an issue that is novel as of the time that the
return was filed. See Williams v. Commissioner, 123 T.C. 144,
153-154 (2004); Mitchell v. Commissioner, T.C. Memo. 2000-145;
cf. Van Camp & Bennion v. United States, 251 F.3d 862, 868 (9th
Cir. 2001) (“Where a case is one ‘of first impression with no
clear authority to guide the decision makers as to the major and
complex issues,’ a negligence penalty is inappropriate” (quoting
Foster v. Commissioner, 756 F.2d 1430, 1439 (9th Cir. 1985),
affg. in part and vacating as to an addition to tax for
negligence 80 T.C. 34 (1983))).
We find reasonable cause on the basis of the fact that the
issue at hand was novel at the time petitioners filed their tax
return. To be sure, while the Court of Appeals for the Ninth
Circuit in United States v. Tuff, 469 F.3d at 1253, rejected the
taxpayer’s margin debt argument as “nonsense”, the court stated
that the issue was “A question of first impression in this
circuit”, id. at 1251. Given this statement, and the absence
when petitioners filed their 2002 Federal income tax return of
any “clear authority to guide the decision makers as to the major
and complex issues”, Foster v. Commissioner, supra at 1439, we
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