T.C. Summary Opinion 2020-7
UNITED STATES TAX COURT
RELIABLE COMPUTER SERVICES, INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
PATRICK LIND AND MARY BETH BLOTNICK LIND, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 24302-15S, 24303-15S. Filed January 22, 2020.
Patrick Lind (an officer), for petitioner Reliable Computers, Inc.
Patrick Lind, pro se.
Mayah Solh-Cade, for respondent. -2-
SUMMARY OPINION
CARLUZZO, Chief Special Trial Judge: These cases, consolidated by order
dated September 9, 2016, are subject to the provisions of section 74631 of the
Internal Revenue Code in effect when the petition in each case was filed. Pursuant
to section 7463(b), the decisions to be entered are not reviewable by any other
court, and this opinion shall not be treated as precedent for any other case.
In a notice of deficiency dated June 22, 2015, respondent determined
deficiencies and section 6662(a) penalties with respect to Reliable Computer
Services, Inc.’s (Reliable) Federal income tax for tax years ended June 30, 2011
(fiscal year 2011), and June 30, 2012 (fiscal year 2012). In a notice of deficiency
also dated June 22, 2015, respondent determined deficiencies and section 6662(a)
penalties with respect to the 2010, 2011, and 2012 Federal income tax of Patrick
Lind and Mary Beth Blotnick Lind.
1 Unless otherwise indicated, section references are to the Internal Revenue Code of 1986, as amended, in effect for the years in issue, and Rule references are to the Tax Court Rules of Practice and Procedure. Dollar amounts have been rounded to the nearest dollar. -3-
After concessions,2 the issues for decision are whether: (1) the Linds are
entitled to a deduction for other expenses claimed on a Schedule C, Profit or Loss
From Business, included with their 2010 Federal income tax return; (2) the Linds
accurately reported the cost of goods sold (COGS) on a Schedule C included with
their 2010 Federal income tax return; (3) the Linds received but failed to report
dividend income of $20,294, $27,797, and $63,706 from Reliable3 in 2010, 2011,
and 2012, respectively; (4) the Linds properly reported the gains from the sale of
Reliable’s inventory as capital gain on Schedules D, Capital Gains and Losses,
included with their 2011 and 2012 Federal income tax returns; (5) Reliable is
entitled to various business expense deductions for the years in issue; (6) Reliable
properly reported COGS for the years in issue; (7) Reliable had ending inventory
of $8,105 and $30,406 for fiscal years 2011 and 2012, respectively; (8) Reliable
understated gross receipts by $56,048 for fiscal year 2012; and (9) the Linds
and/or Reliable are liable for a section 6662(a) accuracy-related penalty for any
year in issue.
2 Reliable concedes that it is not entitled to a net operating loss carryforward deduction of $2,435 for fiscal year 2011. Respondent now concedes that Reliable is entitled to the $3,492 deduction for taxes and licenses expenses claimed on its return for fiscal year 2012. 3 At all times relevant, Mr. Lind operated and controlled Reliable. -4-
Background
Some of the facts have been stipulated and are so found. At all times
relevant, the Linds lived in Illinois, which was also the principal place of
Reliable’s business.
Mr. Lind is the sole shareholder and an officer of Reliable, a C corporation.
Reliable computes its Federal income tax liability on the basis of a fiscal year
ending June 30. Reliable’s business is located in a 5,000-square-foot warehouse
in Lockport, Illinois. In the warehouse Reliable stored the used electronic devices
it purchased from Fermi National Accelerator Laboratory, U.S. Department of
Energy (Fermilab), pursuant to the terms of a sales agreement entered into with
Fermilab. According to those terms, over a 5-year period Reliable was entitled to
purchase used electronic equipment for 13 cents per pound. The sales agreement
obligated Reliable to collect the used electronic equipment at a location and time
Fermilab designated. Mr. Lind routinely used his privately owned pickup trucks
to transport the used electronic equipment from Fermilab to Reliable’s warehouse.
Reliable resold some of the used electronic equipment it purchased from
Fermilab to buyers through eBay. Reliable received payments through PayPal,
Inc. (PayPal), for most, if not all, items sold. Reliable shipped the merchandise to
its buyers via UPS. Some of the used electronic devices were sold as is, while -5-
some were dismantled and sold as components. Reliable stored a considerable
amount of unsold used electronic equipment in the warehouse.
Reliable maintained receipts, invoices, and statements, including UPS and
AT&T statements, which were used to maintain a general ledger.
The Linds maintained a joint bank account at Harris Bank (joint account)
during the years in issue. Reliable maintained a corporate bank account at Harris
Bank (corporate account) during the years in issue. Mr. Lind received checks
from the corporate account, which he deposited into the Linds’ joint account, of
$38,450, $65,900, and $102,400 in 2010, 2011, and 2012, respectively. Some of
the deposits represent the wages Reliable paid Mr. Lind; however, Reliable also
made payments to petitioner in excess of the wages reported on the Linds’ returns.
Reliable was profitable during the relevant periods, and Mr. Lind often used funds
from the corporate account to pay his personal expenses, including cell phone and
telephone bills, medical expenses, taxes, and “warehouse expenses”.
Reliable’s timely filed Federal corporate income tax returns for fiscal years
2011 and 2012 were prepared by a paid income tax return preparer. On its Federal
corporate income tax returns for fiscal years 2011 and 2012, Reliable checked the
box for the “Accrual” accounting method and reported its business activity as
“sales”. -6-
On its Federal corporate income tax returns for fiscal years 2011 and 2012,
Reliable reported gross sales of $117,025 and $122,628, respectively, and COGS
of $37,468 and $42,153, respectively, consisting of the following:
COGS 2011 2012
Purchases -0- $22,301 Advertising sales and production costs $1,675 7,391 Equipment rental 2,400 -0- Freight delivery and logistics 5,880 2,515 Parts and supply 8,105 1,368 Process costs 1,751 -0- Shipping 9,681 -0- Shop supply 528 1,366 Subcontract and commission 1,110 -0- Warehouse expense 6,338 7,212 Total 37,468 42,153
Reliable did not report any beginning or ending inventory on its tax returns and
did not use inventory accounting for either tax or financial accounting purposes
for its fiscal years in issue. Since its incorporation, Reliable has reported no
opening or closing inventories on its tax returns; instead it treated purchases as
current expenses each year.
As relevant, Reliable claimed other deductions of $17,314 and $22,704 on
its Federal corporate income tax returns for fiscal years 2011 and 2012,
respectively, consisting of the following expenses: -7-
Other deductions 2011 2012
Accounting $1,485 $2,025 Dues and subscriptions 279 -0- Insurance 2,974 2,955 Office expense 424 2,040 Telephone 3,107 3,183 Truck expense 5,288 8,593 Utilities 3,757 3,908 Total 17,314 22,704
Reliable also claimed a $2,435 net operating loss deduction on its Federal
corporate income tax return for fiscal year 2011.
The Linds’ joint Federal income tax returns for 2010 and 2012, as well as
their amended joint Federal income tax return for 2011, were prepared by the same
paid income tax return preparer that prepared Reliable’s returns. The Linds and
Reliable employed that income tax return preparer for over 30 years.
As relevant, the Linds’ 2010 return included a Schedule C showing Mr.
Lind as the proprietor of a “sales” business. On the Schedule C they reported
gross sales of $6,000 and COGS of $1,008. They also reported a $1,950 deduction
for other expenses, consisting entirely of outside services. The income reported
and deductions claimed on the Schedule C are computed under the cash method. -8-
The Linds attached a Schedule D to their 2011 and 2012 returns in which
they reported net long-term capital gains of $21,749 and $57,100, respectively,
from the sale of Reliable’s assets.
In the notice of deficiency related to the Linds, respondent: (1) disallowed
the $1,950 deduction for other expenses claimed on the Schedule C for 2010;
(2) disallowed COGS of $1,008 on the Schedule C for 2010; (3) determined that
they received but failed to report dividend income of $20,294, $27,797, and
$63,706 from Reliable in 2010, 2011, and 2012, respectively, for personal
expenses paid from the corporate account plus cash distributions in excess of
wages; (4) disallowed the capital gains reported on Schedules D of $21,749 and
$57,100 for 2011 and 2012, respectively; and (5) imposed a section 6662(a)
accuracy-related penalty on various grounds for each year. Some of the
adjustments made in the notice are computational and will not be discussed.
In the notice of deficiency related to Reliable, respondent: (1) disallowed
$14,767 of the $37,468 of COGS for fiscal year 2011;4 (2) disallowed $5,249 of
4 The disallowed COGS for fiscal year 2011 consists of “Adv Sales and Production Costs” of $1,675, “Equipment Rental” of $2,400, “Freight Delivery and Logistics” of $5,880, “Shop Supply” of $528, “Subcontract and Commission” of $1,110, and “Warehouse Expense” of $3,174. -9-
the $42,153 of COGS for fiscal year 2012;5 (3) disallowed $1,405 of the $3,107 of
deductions for telephone expenses for fiscal year 2011; (4) disallowed $6,080 of
$22,704 for other trade or business expense deductions for fiscal year 2012;6
(5) increased Reliable’s gross receipts by $56,048 for fiscal year 2012;
(6) disallowed a net operating loss carryforward deduction of $2,435 for fiscal
year 2011; (7) determined that Reliable had ending inventories of $8,105 and
$30,406 for fiscal years 2011 and 2012, respectively; and (8) imposed a section
6662(a) accuracy-related penalty on various grounds for each year. Some of the
adjustments in the notice have been conceded by one or the other of the parties
and need not be addressed.
Discussion
I. Burden of Proof
As a general rule, the Commissioner’s determination of a taxpayer’s Federal
income tax liability in a notice of deficiency is presumed correct, and the taxpayer
5 The disallowed COGS for fiscal year 2012 consists of “Shop Supply” of $1,366, “Parts and Supply” of $1,368, and “Freight Delivery and Logistics” of $2,515. 6 The disallowed other trade or business expense deductions for fiscal year 2012 consist of telephone expenses of $3,055, accounting expenses of $985, and office expenses of $2,040. - 10 -
bears the burden of proving that the determination is erroneous. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933).7
II. COGS, Section 162 Deductions, and Inventory
A. COGS and Section 162 Deductions
The Linds reported COGS of $1,008 and a $1,950 deduction for other
expenses, consisting entirely of outside services, on their Schedule C for 2010.
Reliable reported COGS of $37,468 and $42,153 on its Federal corporate income
tax returns for fiscal years 2011 and 2012, respectively. Reliable also reported
other trade or business deductions of $17,314 and $22,704 on its Federal corporate
income tax returns for fiscal years 2011 and 2012, respectively.
Respondent disallowed the entire amount of COGS and the deduction for
other expenses reported on the Linds’ Schedule C for 2010. Respondent
disallowed portions of the amounts reported as COGS as well as portions of the
deductions for trade or business expenses on Reliable’s Federal corporate income
tax returns for fiscal years 2011 and 2012. According to the Linds and Reliable,
these amounts constitute either COGS or deductible trade or business expenses
7 The Linds and Reliable do not claim and the record does not otherwise demonstrate that the provisions of sec. 7491(a) are applicable here, and we proceed as though they are not. - 11 -
under section 162. Respondent contends that the Linds and Reliable have not
substantiated these expenses.
Section 162 allows a taxpayer to deduct all ordinary and necessary expenses
paid or incurred by the taxpayer in carrying on a trade or business; but personal,
living, or family expenses are not generally deductible. Secs. 162(a), 262; Boyd v.
Commissioner, 122 T.C. 305, 313 (2004). Whether an expense is deductible
pursuant to section 162 is a question of fact to be decided on the basis of all
relevant facts and circumstances. Cloud v. Commissioner, 97 T.C. 613, 618
(1991) (citing Commissioner v. Heininger, 320 U.S. 467, 473-475 (1943)).
COGS is an adjustment to gross income and is computed with proper
adjustment for opening and closing inventories for the year. See secs. 1.61-3(a),
1.162-1(a), Income Tax Regs. Technically, it is not treated as a deduction from
gross income, and it is not subject to the limitations on deductions in sections 162
and 274. See Metra Chem Corp. v. Commissioner, 88 T.C. 654, 661 (1987); B.C.
Cook & Sons, Inc. v. Commissioner, 65 T.C. 422, 428 (1975), aff’d per curiam,
584 F.2d 53 (5th Cir. 1978); secs. 1.61-3(a), 1.162-1(a), 1.471-3, Income Tax
Regs.
A taxpayer is required to maintain records sufficient to substantiate
deductions and COGS claimed on the taxpayer’s return. See sec. 6001; New - 12 -
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); sec. 1.6001-1(a), Income
Tax Regs.; see also Higbee v. Commissioner, 116 T.C. 438, 440 (2001). As a
general rule, if a taxpayer provides sufficient evidence that the taxpayer has paid
or incurred an expense contemplated by section 162(a) but the taxpayer is unable
to adequately substantiate the amount of the expense, then the Court may estimate
the amount of the expense and allow the section 162(a) deduction to that extent.
Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). However, in order
for the Court to estimate the amount of an expense, there must be some basis upon
which an estimate may be made. Vanicek v. Commissioner, 85 T.C. 731, 742-743
(1985). Otherwise, any allowance would amount to unguided largesse. Williams
v. United States, 245 F.2d 559, 560 (5th Cir. 1957). The Cohan rule applies to
COGS. See Goldsmith v. Commissioner, 31 T.C. 56, 62 (1958).
Deductions for expenses attributable to travel (“including meals and lodging
while away from home”), entertainment, gifts, and the use of “listed property” (as
defined in section 280F(d)(4) and including passenger automobiles), if otherwise
allowable, are subject to strict rules of substantiation. See sec. 274(d); Sanford v.
Commissioner, 50 T.C. 823, 827 (1968), aff’d per curiam, 412 F.2d 201 (2d Cir.
1969); sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov.
6, 1985). With respect to deductions for these types of expenses, section 274(d) - 13 -
requires that the taxpayer substantiate either by adequate records or by sufficient
evidence corroborating the taxpayer’s own statement: (1) the amount of the
expense, (2) the time and place the expense was incurred, (3) the business purpose
of the expense, and (4) in the case of an entertainment or gift expense, the business
relationship to the taxpayer of each expense incurred. For “listed property”
expenses, the taxpayer must establish the amount of business use and the amount
of total use for such property. See sec. 1.274-5T(b)(6)(i)(B), Temporary Income
Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).
Substantiation by adequate records requires the taxpayer to maintain an
account book, a diary, a log, a statement of expense, trip sheets, or a similar record
prepared contemporaneously with the expenditure and documentary evidence
(e.g., receipts or bills) of certain expenditures. Sec. 1.274-5(c)(2)(iii), Income Tax
Regs.; sec. 1.274-5T(c)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46017
(Nov. 6, 1985). Substantiation by other sufficient evidence requires the
production of corroborative evidence in support of the taxpayer’s statement
specifically detailing the required elements. Sec. 1.274-5T(c)(3), Temporary
Income Tax Regs., 50 Fed. Reg. 46020 (Nov. 6, 1985).
The Linds offered no explanation for COGS or the deduction for other
expenses reported on their Schedule C for 2010. Accordingly, they are not - 14 -
entitled to COGS or the deduction for other expenses reported on their Schedule C
for 2010.
At trial Mr. Lind testified generally about the nature of Reliable’s COGS
and trade or business expenses for fiscal years 2011 and 2012. In support of the
above-referenced COGS and deductions, he also submitted Reliable’s general
ledger along with receipts, invoices, and statements, all of which we have
carefully reviewed. Handwritten notations accompanying the documents attempt
to tie each expenditure to a deduction claimed on Reliable’s Federal corporate
income tax returns. For example, he labeled numerous purchases at White Castle
and Dunkin Donuts “office” expenses.
As best we can tell from the general ledger and accompanying records,
COGS and deductions in excess of the amounts respondent already allowed were
not substantiated by written evidence, or if so, the written evidence fails to meet
the strict substantiation requirements of section 274(d) that apply to expenses for
car and truck, travel, and meals and entertainment. Otherwise, with respect to
certain expense deductions not subject to the strict substantiation requirements of
section 274(d), Reliable has failed to establish that the expenses are ordinary and
necessary expenses related to its trade or business. The generalized evidence
introduced on the point provides neither proper support for COGS or the - 15 -
deductions nor any basis for us to estimate the amounts of these expenses that it
might have incurred during its fiscal years in issue. See Cohan v. Commissioner,
39 F.2d at 543-544; see also Vanicek v. Commissioner, 85 T.C. at 742-743.
Accordingly, Reliable is not entitled to COGS or deductions for the trade or
business expenses in excess of any amounts respondent already allowed for the
years in issue.
B. Inventory
During the years in issue Reliable reported its income on the accrual method
but did not account for its inventory in the calculation of COGS, instead choosing
to include the amount of its yearly purchases in its computation of COGS even
though it is clear that not all of the items purchased during the year were sold
during the year. In the notice respondent made adjustments to Reliable’s ending
inventory for fiscal year 2011 and beginning and ending inventories for fiscal year
2012. Respondent’s calculations are based on purchases made in fiscal years 2011
and 2012 as reflected in Reliable’s Federal corporate income tax returns for those
years.
Taxpayers are required to take “inventories at the beginning and end of each
taxable year” in which “the production, purchase, or sale of merchandise is an
income-producing factor.” Sec. 1.471-1, Income Tax Regs. - 16 -
Section 1.446-1(a)(4)(i), Income Tax Regs., provides that a taxpayer who is
involved in the production, purchase, or sale of merchandise must account for
merchandise on hand at the beginning and end of each year, so as to compute
properly taxable income for each year. The regulation further provides that such
merchandise is to be accounted for under the methods of computing inventories
provided in sections 471 and 472, and the regulations thereunder.
Applying the regulations under section 446, it becomes apparent that it is
necessary for Reliable to use inventories. See sec. 1.471-1, Income Tax Regs.
Although less than clear, it appears that Reliable contends that the
considerable inventory stored in its 5,000-square-foot warehouse had no value and
therefore its practice of including each year’s purchases in COGS without regard
to an inventory accounting method was appropriate. We find Reliable’s position
unpersuasive and inconsistent with its position that the items remaining at the end
of each year had, at the very least, scrap value. Moreover, Reliable has failed to
introduce any evidence contradicting respondent’s calculations of inventories, and
therefore we find that Reliable has failed to carry its burden of proof with respect
to this issue. - 17 -
III. Constructive Dividends
According to respondent, Mr. Lind received dividends of $20,294, $27,797,
and $63,706 from Reliable in 2010, 2011, and 2012, respectively, consisting of the
following:
Dividend 2010 2011 2012
Personal cell phone $702 $702 -0- Personal telephone -0- -0- $3,055 Warehouse expenses deemed personal 1,142 1,645 -0- Payments in excess of wages 18,450 25,450 57,400 Medical expenses of shareholder -0- -0- 1,367 Personal taxes of shareholder -0- -0- 1,884 Total 20,294 27,797 63,706
A dividend is a distribution of property made by a corporation to its
shareholders from its earnings and profits. Sec. 316(a). A shareholder may
receive a dividend even though the corporation has not formally declared a
distribution. Truesdell v. Commissioner, 89 T.C. 1280, 1295 (1987). If a
corporation makes a noncompensatory payment on behalf of a shareholder without
a business purpose or expectation of repayment, then this amount constitutes a
constructive dividend to the shareholder. Benjamin v. Commissioner, 66 T.C.
1084, 1115 (1976), aff’d, 592 F.2d 1259 (5th Cir. 1979). - 18 -
Reliable’s payments of Mr. Lind’s personal expenses are distributions to
him. See id. At trial Mr. Lind acknowledged that he paid personal expenses from
Reliable’s corporate account during the years in issue. Furthermore, the Linds
have failed to meet their burden of proving that there were insufficient earnings
and profits to support respondent’s determinations of constructive dividends. See
Truesdell v. Commissioner, 89 T.C. at 1295-1296. The Linds have shown no
other error in respondent’s determinations of their unreported constructive
dividends from Reliable for the years in issue. Accordingly, we hold that the
Linds have unreported constructive dividends from Reliable as determined in the
notice.
IV. Net Long-Term Capital Gains
The Linds attached Schedules D to their 2011 and 2012 returns in which
they reported net long-term capital gains of $21,749 and $57,100, respectively.
According to respondent, the items giving rise to the reported net long-term capital
gains were from the sale of Reliable’s assets, a point not disputed by the Linds.
Because the gains derived from the sale of Reliable’s property, the income is
properly reported on Reliable’s Federal corporate income tax returns.
Accordingly, respondent’s disallowance of the capital gains reported on the Linds’
Schedule D of $21,749 and $57,100 for 2011 and 2012, respectively, is sustained. - 19 -
V. Gross Receipts or Sales
Reliable reported gross receipts of $122,628 on its Federal corporate income
tax return for fiscal year 2012. In the notice respondent increased Reliable’s gross
receipts by $56,048 for fiscal year 2012 on account of Reliable’s own books and
records as well as the corporate bank account and PayPal statements.
This adjustment flows from respondent’s disallowance of the $57,100 net
long-term capital gain reported on the Linds’ 2012 return that we have already
determined should properly be reported on Reliable’s Federal corporate income
tax return for fiscal year 2012. Moreover, a review of Reliable’s books and
records and corporate bank account and PayPal statements confirms respondent’s
determination, and Reliable has not provided any evidence to the contrary.
Respondent’s adjustment increasing Reliable’s gross receipts by $56,048 for fiscal
year 2012 is sustained.
VI. Section 6662(a) Accuracy-Related Penalties
Lastly, we consider whether the Linds and/or Reliable are liable for a
section 6662(a) accuracy-related penalty for any year in issue. The evidence
shows that respondent has met his burden of production with respect to the
imposition of accuracy-related penalties for the Linds and Reliable on the basis of - 20 -
an underpayment due to negligence and/or a substantial understatement of income
tax for each period involved. See sec. 6662(a) and (b)(1) and (2).
The accuracy-related penalty does not apply, however, to any part of an
underpayment of tax if it is shown that the taxpayer acted with reasonable cause
and in good faith with respect to that portion. Sec. 6664(c)(1). The determination
of whether a taxpayer acted 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. The Linds and Reliable bear the burden of proving that they
had reasonable cause and acted in good faith with respect to the underpayments.
See Higbee v. Commissioner, 116 T.C. at 449.
Reliance on professional advice will absolve the taxpayer if “such reliance
was reasonable and the taxpayer acted in good faith.” Sec. 1.6664-4(b)(1), Income
Tax Regs. Under certain circumstances, a taxpayer’s reliance upon professional
advice may establish the taxpayer’s “reasonable cause” and “good faith” with
respect to an underpayment of tax if the taxpayer establishes that: (1) the
professional was provided with complete and accurate information, (2) an
incorrect return was a result of the preparer’s mistakes, and (3) the taxpayer
demonstrates good-faith reliance on a competent professional. See Estate of
Goldman v. Commissioner, 112 T.C. 317, 324 (1999), aff’d without published - 21 -
opinion sub nom. Schutter v. Commissioner, 242 F.3d 390 (10th Cir. 2000);
see also Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 99 (2000),
aff’d, 299 F.3d 221 (3d Cir. 2002).
The Linds and Reliable engaged a paid income tax return preparer to
prepare their Federal income tax returns for the years in issue. We are satisfied
that they relied completely upon the preparer not only for advice in the preparation
of the relevant Federal income tax returns but also during the examinations of the
returns and the preparations for trial in these cases. The return preparer testified
on behalf of the Linds and Reliable in response to questions presented by Mr. Lind
but, more likely than not, drafted by the return preparer. We are further satisfied
that the Linds and Reliable presented what financial information each had before
each return was drafted, and it is the return preparer who is responsible for the
positions taken on each of those returns. Although we now reject some of those
positions, we find that the Linds’ and Reliable’s reliance on the return preparer
was made in good faith. The Linds and Reliable employed the same return
preparer for more than 30 years before the years in issue, and nothing in the record
suggests they had any reasons to question the return preparer’s competence.
As to the return preparer’s competence, we note that he testified on behalf
of the Linds and Reliable at trial and his competence was not attacked during - 22 -
cross-examination. We can envision circumstances that could support a finding of
a return preparer’s incompetence from nothing other than the improper positions
taken on a Federal income tax return. This, however, is not that case, and we are
reluctant to assume or infer incompetence here. It follows and we find the Linds
and Reliable are not liable for a section 6662(a) accuracy-related penalty for any
To reflect the foregoing,
Decisions will be entered under
Rule 155.