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income tax for the 2002 taxable year. Petitioner does not
contest that he substantially understated his 2002 income tax.
The vast majority of that understatement was attributable to
petitioner’s failure to report $73,313.30 in wages on his income
tax return for that year. Although petitioner also failed to
report $15 in dividend income and improperly claimed a $7,584
Schedule E passive activity loss, all of petitioner’s and
respondent’s arguments, at trial and in their briefs, focus on
petitioner’s failure to report the $73,313.30 in wages.
With respect to the first prong of the Neonatology, test, we
conclude that petitioner has established that his accountant was
a competent professional who had sufficient expertise to justify
reliance.4 See Neonatology Associates, P.A. v. Commissioner,
supra at 99. With respect to the second prong of the Neonatology
test, Mr. Beail’s letters make clear that petitioner did provide
Mr. Beail with both Forms W-2. Because petitioner’s failure to
report all of his wages is the sole basis argued by respondent to
support the imposition of a penalty in this case, petitioner has
satisfied the second prong of the Neonatology test.
4 Mr. Beail’s letters indicate that he is a certified
public accountant, and records of the Washington State Board of
Accountancy, which this Court will take judicial notice of,
indicate that Mr. Beail is currently licensed to practice public
accounting. In addition, the Supreme Court has held that
accountants, like attorneys, are professionals upon whom
taxpayers can rely for advice “on a matter of tax law, such as
whether a liability exists.” United States v. Boyle, 469 U.S.
241, 251 (1985).
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