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Taxpayers making charitable gift escape accuracy penalty
In a recent Tax Court case about a charitable contribution deduction for a conservation easement, the IRS challenged the taxpayers’ valuation and assessed an accuracy-related penalty.
After wading through the evidence, the court agreed that the charitable deduction had been overstated. However, the court refused to uphold the accuracy-related penalty (Esgar Corporation, et al. v. Commissioner, TC Memo 2012-35, Feb. 6, 2012).
According to the court, taxpayers have reasonably relied on professional advice to negate an accuracy-related penalty if they met three requirements:
1. The adviser was a competent professional who had sufficient expertise to justify reliance.
2. The taxpayers provided necessary and accurate information to the adviser.
3. The taxpayers actually relied in good faith on the adviser’s judgment.
The court found that the appraiser was a competent professional whom the taxpayers had worked with for more than 25 years. The taxpayers had provided the appraiser with all relevant information, and they relied on his advice in good faith.
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The technical information here is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.
© 2012, CPAmerica International. All Rights Reserved.
But the Esrigs had an excuse for the court. It seems the problem was with the Esrigs’ tax preparer. Steven testified that his accountant missed all the deadlines because she had to serve a long prison sentence for murdering her husband.
The court was not convinced, stating, “The Esrigs had no evidence to corroborate this lurid tale, and we therefore find that they had no reasonable cause for failing to timely file.”
Using a convicted felon as your tax preparer may work in The Shawshank Redemption, but it’s probably not a good idea in the real world.
“It is a good thing that we do not get as much government as we pay for.” – Will Rogers
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The technical information here is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.
© 2012, CPAmerica International. All Rights Reserved.
