In Uncategorized on 01/22/2020 at 16:30

When accuracy or substantial understatement of tax chops are in play, the preparer is often the person under the gun. So look for signs that point the way to ducking the chops, based upon the trustworthiness of the preparer.

Patrick Lind and Mary Beth Blotnick Lind, 2020 T. C. Sum. Op. 7, filed 1/22/20, relied on their trusty preparer of thirty years’ unblemished service. So notwithstanding their want of substantiation, constructive dividends, and failure to account for inventory in their wholly-owned C Corp Reliable, among other delictions, they get off without being chopped.

Here’s CSTJ Lewis (“The Man Can Spell”) Carluzzo.

“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.” 2020 T. C. Sum. Op. 7, at p. 21.

But here be dragons, so woodshed your preparer good before you put the preparer on the stand.

“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 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 year in issue.” 2020 T. C. Sum. Op. 7, at pp. 21-22.

Trusty but incompetent? Trusty but a writer of fiction? Don’t find out at the trial.

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