The accuracy-related penalty was properly imposed on a married couple who omitted almost $3.4 million dollars of income from their 115-page federal income tax return. The amount omitted was a substantial understatement of income and was not omitted as a result of professional advice that could be relied upon to avoid the penalty. To be advice, the communication relied upon must reflect the advisor’s analysis and conclusion, and the taxpayer must show that he relied in good faith upon the advisor’s judgment to avoid the penalty.
There was no evidence that the income was omitted from the couple’s return because of any analysis or conclusion of the tax return preparer that the income was not taxable. Moreover, it took no special training for the taxpayer to know that the law required him to report all his Form 1099-MISC income on his tax return. While computational or transcription errors are not inconsistent with the good-faith reasonable cause defense, the taxpayer had a duty to review the return to ensure that all income was included and he failed to explain why the income was omitted from the return.
S.G. Woodsum, 136 TC –, No. 29, Dec. 58,658
Code Sec. 6662
CCH Reference – 2011FED ¶39,651G.135
CCH Reference – 2011FED ¶39,651G.139
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