- 15 -
301.6651-1(c)(1), Proced. & Admin. Regs.; see United States v.
Boyle, supra at 246. The determination of whether a taxpayer
acted with reasonable cause and 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 the proper tax liability, including
reliance on the advice of a tax return preparer. However,
reliance on a professional adviser, alone, is insufficient; the
reliance must be reasonable, and the taxpayer must act in good
faith. Sec. 1.6664-4(b)(1), Income Tax Regs.
Respondent argues that petitioner’s failure to investigate
fully the propriety of this deduction is a clear indicium of
negligence, because any reasonable taxpayer would recognize that
an allowable deduction for all the expenses of an advanced degree
is probably too good to be true.10
However, in providing a reasonable cause and good faith
exception to the section 6662 penalty, section 1.6664-4, Income
Tax Regs., also provides a relevant example wherein a taxpayer
engages a professional tax adviser for advice on the
10 Respondent relies on sec. 1.6662-3(b)(ii), Income Tax
Regs., which states that negligence is strongly indicated where
“A taxpayer fails to make a reasonable attempt to ascertain the
correctness of a deduction, credit or exclusion on a return which
would seem to a reasonable and prudent person to be ‘too good to
be true’”.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: March 27, 2008