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6662(d)(1)(A)(ii).3 Respondent’s burden of production with
respect to this penalty has been satisfied. See sec. 7491(c).
The section 6662(a) accuracy-related penalty does not apply
to any portion of the underpayment if the taxpayer demonstrates
that there was reasonable cause for such portion and the taxpayer
acted in good faith with respect to it (the good faith
exception). Sec. 6664(c)(1); sec. 1.6664-4(a), Income Tax Regs.
A taxpayer who reasonably relies upon the advice of a
competent tax professional can avoid the imposition of the
section 6662(a) penalty, if the taxpayer demonstrates that the
tax professional was supplied with sufficient information to
accurately prepare the taxpayer’s Federal income tax return. See
United States v. Boyle, 469 U.S. 241 (1985); Schwalbach v.
Commissioner, 111 T.C. 215 (1998).
Reliance on a tax adviser is not reasonable, however, where
the taxpayer has failed to disclose adequately “all necessary
information” affecting the computation of the taxpayer’s tax
liability. Ellwest Stereo Theatres of Memphis, Inc. v.
Commissioner, T.C. Memo. 1995-610.
Petitioners do not claim, and the record does not otherwise
indicate, that petitioners provided their return preparer with
3 Ten percent of the tax required to be shown on
petitioners’ 2003 return is less than $5,000. See sec.
6662(d)(1)(A)(i).
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Last modified: March 27, 2008