Alex and Tonja Oria - Page 10

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          due care of a reasonable and ordinarily prudent person under like           
          circumstances to insure that his own compensation from Medico was           
          properly accounted for and reported.                                        
               The accuracy-related penalty does not apply to any part of             
          an underpayment of tax if it is shown the taxpayer acted with               
          reasonable cause and in good faith.  Sec. 6664(c)(1).  The                  
          determination of whether a taxpayer acted in good faith is made             
          on a case-by-case basis, taking into account all the pertinent              
          facts and circumstances.  Sec. 1.6664-4(b)(1), Income Tax Regs.             
          Generally, the most important factor is the extent of the                   
          taxpayer’s effort to assess his proper tax liability.  Id.  The             
          taxpayer bears the burden of proof that he had reasonable cause             
          and acted in good faith with respect to the underpayment.  Higbee           
          v. Commissioner, supra at 447.                                              
               Petitioners defend against the accuracy-related penalty on             
          the ground that they acted with reasonable cause and in good                
          faith.  They argue that the penalty should not apply because they           
          relied on the advice of Mr. Loeser, a certified public accountant           
          with extensive experience in preparing tax returns.                         
               The general rule is that a taxpayer has a duty to file a               
          complete and accurate tax return and cannot avoid that duty by              
          placing responsibility with an agent.  United States v. Boyle,              
          469 U.S. 241, 252 (1985); Metra Chem Corp. v. Commissioner, 88              
          T.C. 654, 662 (1987).  In limited situations, the good faith                
          reliance on the advice of an independent, competent professional            
          in the preparation of the tax return can satisfy the reasonable             

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Last modified: November 10, 2007