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There is no question whether petitioners provided necessary and
accurate information to their tax professional. Finally, we find
that petitioners relied in good faith on the adviser’s judgment
and had good reason to do so. It was solely the actions of
petitioners’ tax professional that caused petitioners’ failure to
meet the procedural requisites for their noncash charitable
contributions.10 Under these circumstances, we hold that
petitioners had reasonable cause and are not liable for the
section 6662 penalty with respect to the disallowed noncash
charitable contribution deductions.
Whether Rance and LaRhea Are Liable for a Section 6662 Penalty
With Respect to Their Disallowed Schedule F Losses
Respondent argues that Rance and LaRhea were negligent in
claiming Schedule F losses in each of the taxable years before
the Court. In support of his argument, respondent points out
that Rance described the activity as “crop livestock” on the
Schedule F, whereas at trial it was described as a cutting horse
activity. Respondent also points to the failure to keep business
records, other than a commingled bank checking account. See sec.
1.6662-3(b)(1), Income Tax Regs.
10 We see a difference and a distinction between reliance
for procedural as opposed to substantive aspects or tax
reporting. Petitioners followed the advice and guidance of the
tax professional and provided him with the information needed to
document their contributions. Petitioners relied on the
professional’s ample experience and obligation to make sure that
the transactions were properly reported, which the professional
failed to do.
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