1Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for 2003 and 2004, the

taxable years in issue, and all Rule references are to the Tax

Court Rules of Practice and Procedure.

T.C. Summary Opinion 2008-157

UNITED STATES TAX COURT

RONI YTSHAKY, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 14707-07S. Filed December 16, 2008. 

Roni Ytshaky, pro se.

Jonathan H. Sloat, for respondent.

GERBER, Judge: This case was heard pursuant to the

provisions of section 74631 of the Internal Revenue Code in

effect when the petition was filed. Pursuant to section

7463(b), the decision to be entered is not reviewable by any
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2No question was raised in this case as to the burden of

proof or production or whether the burden of proof was shifted

under sec. 7491. 

other court, and this opinion shall not be treated as precedent

for any other case. Respondent determined deficiencies in

petitioner’s 2003 and 2004 Federal income taxes of $3,550 and

$1,825, respectively. Respondent also determined accuracyrelated penalties under section 6662(a) of $710 and $365 for

2003 and 2004, respectively. We consider whether petitioner is

responsible for the income tax deficiencies where the return

preparer intentionally included false deductions and whether

petitioner is liable for the accuracy-related penalties. 

Background2

Petitioner resided in California at the time his petition

was filed. During 2003 and 2004 petitioner resided in New York

City, where he worked as a driver and received wages that were

reported to respondent by means of Forms W-2, Wage and Tax

Statement. When it was time to have his 2003 Federal income tax

return prepared, a friend at work advised petitioner of a return

preparer who was a certified public accountant (C.P.A.) and a

former employee of the Internal Revenue Service (IRS). 

Petitioner went to the C.P.A.’s office and gave him his

Form W-2 for his 2003 wages. The C.P.A., by means of a

computerized program, produced a return which he instructed

petitioner to sign and mail to the IRS. Petitioner, relying 
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on his preparer’s expertise, did not review the return, signed 

it, and mailed it to the IRS. For his 2004 Federal income tax

return, petitioner used the same C.P.A. and followed the same

procedures and circumstances. For each of the years 2003 and

2004 petitioner received an income tax refund. Subsequently, 

the C.P.A.-tax return preparer was indicted on charges of filing

false returns for his clients. Essentially, the C.P.A. was

placing false deductions on returns so that the taxpayer/filer’s

return would result in an overpayment or larger overpayment of

tax. Respondent, in connection with the criminal charges against

the C.P.A., audited petitioner’s returns for 2003 and 2004 and

determined that petitioner was not entitled to the false

deductions that had been placed on the returns. Petitioner 

was, of course, not able to substantiate the deductions, and

respondent issued a notice of deficiency from which this

proceeding was initiated. 

Discussion

Petitioner contends that he should not have to pay the

income tax deficiencies because his tax return preparer,

unbeknownst to petitioner, falsely and intentionally generated

the overpayments and the refunds that petitioner had received. 

Petitioner also contends that he should not be liable for the

accuracy-related penalties because he reasonably relied on his

tax return preparer.
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With respect to petitioner’s contention that he should not

be liable to pay the income tax deficiencies, this Court has

previously addressed similar circumstances. In Kelly v.

Commissioner, T.C. Memo. 1983-156, we held that even though we

sympathized with the taxpayers “about the quality of the return

preparation services they received, this is simply no reason to

relieve petitioners of taxes which were legally owing and which

would have been paid upon the filing of their 1976 return if

their return had been correctly calculated.”

 The holding in Kelly is based on the rationale that,

ultimately, the circumstances by which we prepare our returns or

calculate our tax liabilities do not obviate our obligation to

pay the correct tax liability. Petitioner contends that the

circumstances in Kelly are distinguishable because the incorrect 

tax result in that case was caused by poor preparation skills

and inadvertence, whereas in petitioner’s situation, the

incorrect tax results were intentionally and fraudulently caused

by his preparer’s malfeasance. 

Although we sympathize with petitioner’s circumstances, 

the fact that his preparer intentionally caused the wrong tax

results does not mitigate his obligation to pay the correct

amount of tax. Accordingly, we hold that petitioner is liable

for the income tax deficiencies determined by respondent for 

his 2003 and 2004 tax years. 
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Respondent determined that petitioner is liable for

accuracy-related penalties for both taxable years. Petitioner

argues that he relied on his C.P.A. to prepare his return and

that such reliance was reasonable and constitutes reasonable

cause so as to excuse him from application of the penalties which

are otherwise applicable. There is no question here about

whether the section 6662(a) accuracy-related penalties would be

applicable but for the showing of reasonable cause. The

deductions claimed on petitioner’s 2003 and 2004 income tax

returns were false, and he is unable to substantiate them.

Section 6662(a) and (b)(1) imposes a penalty of 20 percent

on any portion of an underpayment of tax that is attributable to

negligence or disregard of rules or regulations. “Negligence” is

defined as any failure to make a reasonable attempt to comply

with the provisions of the Internal Revenue Code, and the term

“disregard” includes any careless, reckless, or intentional

disregard. See sec. 6662(c). A position with respect to an item

is attributable to negligence if it lacks a reasonable basis. 

See sec. 1.6662-3(b)(1), Income Tax Regs. Section 6664(c)(1)

provides that the penalty under section 6662(a) shall not apply

to any portion of an underpayment if it is shown that there was

reasonable cause for the taxpayer’s position with respect to that

portion and that the taxpayer acted in good faith with respect to

that portion. The determination of whether a taxpayer acted with
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reasonable cause and in good faith within the meaning of section

6664(c)(1) is made on a case-by-case basis, taking into account

all the pertinent facts and circumstances. See sec. 1.6664-

4(b)(1), Income Tax Regs.

 Generally, the duty of filing accurate returns cannot be

avoided by placing the responsibility on a tax return preparer.

See Metra Chem Corp. v. Commissioner, 88 T.C. 654, 662 (1987).

Although a taxpayer remains liable for a deficiency attributable

to a return prepared by an accountant, a taxpayer who supplies a

qualified tax return preparer with all relevant information and

who reasonably and in good faith relies on the preparer’s advice

is not negligent and has not disregarded rules or regulations,

even if the advice is incorrect and results in a deficiency. See

Freytag v. Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d

1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991). 

Although numerous cases address this question, it is one

that is essentially a factual determination that must be

considered ad hoc in each case. Petitioner’s educational and

work background did not provide him with any expertise in tax

preparation or an understanding of tax law. It was reasonable

and appropriate that he seek assistance in the preparation of his

Federal income tax return. It was also reasonable for him to

hire a C.P.A. who had formerly worked for the IRS as his

preparer. Under the circumstances, it was reasonable for
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petitioner to rely on his C.P.A. We accordingly hold that

petitioner has shown reasonable cause and is not liable for the

accuracy-related penalties for his 2003 and 2004 tax years.

To reflect the foregoing,

Decision will be entered

for respondent as to the

deficiencies in income taxes

and for petitioner as to the

accuracy-related penalties.