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were incorrect, since he had neither paid Mr. Loeser or one of
his affiliates directly nor had he reimbursed Medico. A taxpayer
cannot stick his head in the sand while an adviser explains the
basis of his advice and pop it out only to hear the favorable
conclusion. Considering all the facts and circumstances, we
conclude, and find, that petitioners did not act with reasonable
cause and in good faith in relying on Mr. Loeser to prepare a
correct income tax return for them. The underpayment in tax
attributable to the $248,524 in checks received from Medico and
not reported on the Form 1040 is due to negligence, and there is
not reasonable cause, nor did petitioners act in good faith, with
respect to that portion of the underpayment.
We sustain the accuracy-related penalty determined by
respondent with respect to petitioners’ underpayment of tax for
2000.
Decision will be entered
under Rule 155.
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Last modified: November 10, 2007