                  T.C. Summary Opinion 2010-130



                     UNITED STATES TAX COURT



             CHARLES FOWLER JACOBSON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13309-09S.              Filed September 7, 2010.



     Charles Fowler Jacobson, pro se.

     Nathan Hall, for respondent.



     PANUTHOS, Chief Special Trial Judge:   This case was heard

pursuant to the provisions of section 7463 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 other court, and this opinion shall not be treated as

precedent for any other case.   Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in
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effect for the year in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.

     Respondent determined a $28,886 deficiency in petitioner’s

2006 Federal income tax and an accuracy-related penalty of $5,777

pursuant to section 6662(a).   After concessions,1 the sole issue

for decision is whether petitioner is liable for the accuracy-

related penalty.

                            Background

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   At the time the petition

was filed, petitioner resided in Washington State.

     In August 2006 petitioner retired from his longtime job as

an engineer.   In September 2006 petitioner exercised his right to

employee stock options, which resulted in a same-day purchase and

sale of stock in his former employer’s company, Iridex Corp.

(Iridex).   Petitioner used the gross proceeds from sale to buy a

truck and a fifth-wheel trailer for his planned travel across the

United States.   In the months after his retirement, petitioner

visited family in Washington State and ultimately established


     1
      The parties agree that petitioner received $166,623.45 for
the sale of stock which had a basis of $79,956.50, resulting in a
short-term capital gain of $86,666.95. The parties also agree
that petitioner received $47,217 for the sale of stock which had
a basis of $19,184, resulting in a long-term capital gain of
$28,033. As a result of this agreement, the deficiency will be
less than that determined in the notice of deficiency.
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residence there in December 2006.   In early 2007 petitioner

permanently vacated his California residence, and he began a

cross-country trip in early April 2007.   Petitioner believed he

had all of his financial documents and information returns when

he set out on his trip.   While traveling in Arizona petitioner

used tax preparation software to complete his Form 1040, U.S.

Individual Income Tax Return.   Petitioner had some information

returns in his possession.   Petitioner mailed his completed Form

1040 while in Arizona in April 2007.

     On his original return petitioner did not report any short-

term capital gain transactions and reported a negligible cost

basis relating to long-term capital gain transactions.    The

Internal Revenue Service (IRS) sent petitioner a letter

identifying omitted gross proceeds from short-term capital

transactions resulting in an increase in tax.   Shortly

thereafter, petitioner obtained apparently missing information

from Iridex and filed an amended return in September 2008.      On

his amended return petitioner included short-term capital gain

transactions and modified long-term capital gain transactions to

account for a higher cost basis.    As indicated, the parties now

agree as to the gross proceeds and bases of the stock

transactions.
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       The record indicates that petitioner made multiple attempts

to contact the IRS by telephone after receiving letters from the

IRS.       In response to the IRS petitioner also submitted amended

returns2 to include omitted items; but because of his travel and

the limited availability of the IRS employee assigned to his

case, the communication was often delayed.       Ultimately, a notice

of deficiency was issued and petitioner filed a petition with

this Court.

                                Discussion

       As indicated, the parties have come to an agreement as to

the adjustments in the notice of deficiency except for the

application of the accuracy-related penalty.

       Section 6662(a) and (b)(1) and (2) imposes a penalty equal

to 20 percent of any underpayment of tax that is attributable to

negligence or disregard of rules or regulations or to a

substantial understatement of income tax.3      The term “negligence”

includes any failure to make a reasonable attempt to comply with

the provisions of the internal revenue laws.       Sec. 6662(c); sec.


       2
      There is one amended return in the record. Petitioner
asserts he prepared and submitted multiple amended returns.
       3
      Pursuant to the notice of deficiency, it would appear that
there is a substantial understatement of income tax. As
indicated, the parties have agreed to the basis, gross proceeds
from sale, and amount of capital gain. It is not clear whether
there remains a substantial understatement after the
recalculation of the deficiency. Given our conclusions as to
negligence, we need not decide whether the understatement is
substantial.
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1.6662-3(b)(1), Income Tax Regs.   Negligence is strongly

indicated where a taxpayer fails to include on an income tax

return an amount of income shown on an information return.

Sec. 1.6662-3(b)(1)(i), Income Tax Regs.

     Petitioner failed to include the gross proceeds shown on an

information return.   Petitioner asserts that he either did not

receive the Form 10994 or misplaced it during the move and

preparation for his trip.   The nonreceipt of a Form 1099 does not

convert taxable income into nontaxable income which need not be

reported.   Vaughn v. Commissioner, T.C. Memo. 1992-317, affd.

without published opinion 15 F.3d 1095 (9th Cir. 1993).

     A cursory review of the return should have revealed the

omission of the $166,000 in gross proceeds from a sale of stock.

The Schedule D, Capital Gains and Losses, included detailed long-

term capital gain information and showed acquisition dates before

2006.    Petitioner knew he had bought and sold Iridex stock on the

same day in the year of his retirement, resulting in short-term

gain, and yet he made no entries for short-term capital gain.

Petitioner was negligent in failing to include the income from

his stock sales in 2006.

     The accuracy-related penalty under section 6662(a) does not

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


     4
      The record is unclear as to whether there was more than one
Form 1099 issued to petitioner.
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was reasonable cause for, and that the taxpayer acted in good

faith with respect to, such portion.    Sec. 6664(c)(1).   Although

the Commissioner bears the burden of production under section

7491(c), the taxpayer bears the burden of proving reasonable

cause under section 6664(c).    Higbee v. Commissioner, 116 T.C.

438, 446-447 (2001).    Respondent has met his burden of production

by showing that petitioner did not include the gross proceeds

from sale of stock on his 2006 income tax return.

       The determination of whether the taxpayer acted with

reasonable cause and in good faith depends on the pertinent facts

and circumstances, including the taxpayer’s efforts to assess the

proper tax liability; the knowledge and the experience of the

taxpayer; and the reliance on the advice of a professional, such

as an accountant.    Sec. 1.6664-4(b)(1), Income Tax Regs.

Reliance upon expert advice will not exculpate a taxpayer who

supplies the return preparer with incomplete or inaccurate

information.    Lester Lumber Co. v. Commissioner, 14 T.C. 255, 263

(1950).    Tax preparation software “is only as good as the

information one inputs into it.”    Bunney v. Commissioner, 114

T.C. 259, 267 (2000).    Reliance on a preparer or software is not

reasonable where even a cursory review of the return would reveal

inaccurate entries.    See Pratt v. Commissioner, T.C. Memo. 2002-

279.
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     We reject petitioner’s claimed reliance on tax preparation

software since he input incomplete information into the software.

Petitioner’s actions after he received letters from the IRS have

no bearing on whether he had reasonable cause for the

underpayment of tax on the original return.       We therefore

conclude that petitioner did not have reasonable cause for and

did not act in good faith with respect to the underpayment.

     To reflect the foregoing,


                                              Decision will be entered

                                         under Rule 155.
