                       T.C. Memo. 2009-84



                     UNITED STATES TAX COURT



                 ESTATE OF KWANG LEE, DECEASED,
           ANTHONY J. FRESE, EXECUTOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14511-06.              Filed April 27, 2009.



     Frank Agostino, Soh-Yung Erica Son, Michael P. Mattaliano,

and Barbara L. de Mare, for petitioner.1

     Lisa M. Rodriguez, for respondent.




     1
      Barbara L. de Mare (Ms. de Mare) entered her appearance on
Aug. 10, 2006. She was allowed to withdraw her appearance on
Sept. 2, 2008, because of a conflict of interest. Frank Agostino
entered his appearance on Sept. 9, 2008. Soh-Yung Erica Son and
Michael P. Mattaliano entered their appearances on Sept. 23,
2008.
                                -2-

              MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:   Respondent determined a $1,020,129 deficiency

in the Federal estate tax of the Estate of Kwang Lee, Deceased

(decedent’s estate), a $255,032 addition to that tax under

section 6651(a)(1) for untimely filing, and a $204,026

accuracy-related penalty under section 6662(a) for negligence or

disregard of rules or regulations, or alternatively, for a

substantial understatement of income tax.2   In Estate of Lee v.

Commissioner, T.C. Memo. 2007-371, the Court decided through

partial summary judgment that decedent’s estate did not qualify

for a marital deduction.   Our decision was predicated on our

holding (contrary to the argument of petitioner) that language

included in the wills of Kwang Lee (decedent) and his wife,

Kyoung Lee (Ms. Lee; collectively, the Lees), could not change

the order of their actual deaths for purposes of determining who

was the surviving spouse within the meaning of section 2056(a).

See id.   The only issues remaining in dispute, and which we

decide herein, are whether decedent’s estate is liable for the

accuracy-related penalty and the addition to tax.   Following a

trial on these issues, we hold that decedent’s estate is liable

for neither of these items.



     2
      Unless otherwise noted, section references are to the
applicable versions of the Internal Revenue Code, and Rule
references are to the Tax Court Rules of Practice and Procedure.
                                  -3-

                           FINDINGS OF FACT

I.    Preliminaries

       The parties filed with the Court numerous stipulations of

fact accompanied by various exhibits described in the

stipulations.     The Court also deemed some facts and exhibits

stipulated pursuant to Rule 91(f).      We incorporate herein the

stipulated facts and exhibits, and we find the stipulated facts

accordingly.

II.    Decedent

       Decedent was born on January 4, 1941, and he later married

Ms. Lee.    The Lees had a significant combined wealth that was

attributable primarily to life insurance and stock options that

were decedent’s employee benefits.      Those benefits were titled in

decedent’s name alone.     A minimal part of the Lees’ combined

wealth consisted of assets owned jointly by the Lees and assets

owned by Ms. Lee alone.

       Ms. Lee died testate on August 15, 2001.    Decedent died

testate on September 30, 2001.     The will of each of the Lees was

dated June 21, 2001.

III.    Judge Frese

       Anthony J. Frese (Judge Frese) has been a presiding

municipal court judge for the last 23 years.      Cases in his court

relate primarily to motor vehicle and parking citations and to

minor criminal charges.     Judge Frese also is a practicing
                                 -4-

attorney affiliated with the law firm of Nowell Amoroso Klein

Bierman, P.A. (Nowell).    Judge Frese practices primarily in the

defense of individuals or entities charged with violating liquor

laws.    Judge Frese does not practice tax law, and he has no

specialized knowledge of Federal tax.    Judge Frese has limited

experience in estate planning and in estate administration.

IV.    The Lees Seek the Expeditious Preparation of Their Wills

       Judge Frese and decedent were neighbors and good friends.

In the spring of 2001, decedent informed Judge Frese that the

Lees wanted their wills prepared expeditiously because they were

dying of cancer.    Decedent asked Judge Frese if he would prepare

their wills for them.    Judge Frese declined because, he stated,

he was unqualified to prepare their wills in the manner they

desired.

V.    Ms. de Mare

       Judge Frese asked Henry Amoroso, a partner at Nowell, to

recommend an estate planning attorney whom Judge Frese could

recommend to the Lees.    Henry Amoroso recommended Ms. de Mare.

Henry Amoroso told Judge Frese that estate planning and will

preparation were two of Ms. de Mare’s specialties and that she

had been practicing law in those areas for many years.    Ms. de

Mare was a partner at Nowell who had specialized in estate

planning, estate administration, and the preparation of Federal

estate tax returns for over 30 years.
                                 -5-

      Following Judge Frese’s conversation with Henry Amoroso,

Judge Frese read the section of Nowell’s practice brochure that

described Ms. de Mare’s education, experience, and professional

affiliations.    He also met and spoke with her personally.   Judge

Frese concluded from his review of Ms. de Mare’s qualifications

and from his conversations with her and Henry Amoroso that Ms. de

Mare was a qualified estate planning attorney, a qualified estate

administrator, and a qualified preparer of Federal estate tax

returns.   Judge Frese advised the Lees to retain her to prepare

their wills.    The Lees followed that advice.

VI.   Preparation of Wills

      Ms. de Mare concluded that the Lees could minimize Federal

estate taxes payable on their estates if decedent transferred

some of his assets to Ms. Lee.    Ms. de Mare first considered

having decedent disclaim or actually transfer some of his

employee benefits to Ms. Lee.    Ms. de Mare ascertained, however,

that decedent could neither transfer nor disclaim those benefits.

Ms. de Mare concluded that decedent had to predecease Ms. Lee to

cause the desired transfer of assets.    Because Ms. de Mare could

not be sure that decedent would actually die first, she included

a deemed survivorship provision in each of the Lees’ wills.      Ms.

Lee’s will states:    “For purposes of this Will, any person who

shall die within six (6) months after my death shall be deemed to

have predeceased me”.    Decedent’s will states:
                                 -6-

       A. For purposes of this Will, any person, other than
       my wife, who shall die within six (6) months after my
       death shall be deemed to have predeceased me.

       B. In the event that my wife shall die at the same
       time as I, or under circumstances such as to render it
       difficult or impossible to determine who died first, my
       wife shall be deemed to have survived me.

VII.    Judge Frese Appointed Executor of Estates

       Judge Frese was appointed executor of each of the Lees’

estates shortly after they died.    These appointments were made

pursuant to the Lees’ wills and were the first two times that

Judge Frese served as an executor.     Judge Frese asked Ms. de Mare

to help him administer the estates because she was an attorney

familiar with the Lees’ assets and she had drafted their wills.

Judge Frese asked Ms. de Mare to prepare the necessary tax

returns for him to sign and to file.    Judge Frese understood that

he had to file a Federal estate tax return for decedent’s estate

and that the unextended due date of the return was June 30, 2002.

       Judge Frese provided Ms. de Mare with all of the information

she requested to help him administer decedent’s estate and for

her to prepare its Federal estate tax return.    Judge Frese spoke

regularly with Ms. de Mare about the administration of decedent’s

estate and about her preparation of its estate tax return.     Judge

Frese monitored the extent that Ms. de Mare was working on

decedent’s estate through his conversations with her and through

his review of the legal bills that she tendered to the estate for

payment.
                                -7-

VIII.   First Request for Extension

      On June 28, 2002, Ms. de Mare, as an attorney for and on

behalf of decedent’s estate, signed and mailed to the Internal

Revenue Service a Form 4768, Application for Extension of Time To

File a Return and/or Pay U.S. Estate (and Generation-Skipping

Transfer) Taxes.   She requested through that form an automatic

6-month extension of time to file the estate tax return of

decedent’s estate.   She included with the request a check for

$250,000.   That check was given to her by Judge Frese, and the

amount of the check represented her estimate of a little more

than the Federal estate tax that would ultimately be due on

decedent’s estate.   Her filing of this form extended the due date

of the estate tax return of decedent’s estate to December 30,

2002.   She provided Judge Frese with a copy of the form as filed,

and he was aware of the extended due date.

IX.   Second Request for Extension

      On December 30, 2002, Ms. de Mare went to her office

intending to complete the estate tax return for decedent’s

estate.   Judge Frese had told her he would be in his office on

that day to sign and to file the return, and she believed that

only minor portions of the return remained to be completed.   Ms.

de Mare prepared Federal estate tax returns for her clients using

a software program on her computer.   When she tried to access

that program on December 30, 2002, all of her client’s returns
                                -8-

were gone.   She attempted to retrieve the estate tax return of

decedent’s estate but to no avail.

     Ms. de Mare concluded late that afternoon that she would be

unable to retrieve the return, and she informed Judge Frese of

her situation.   She advised him not to worry because she had

everything under control.   She advised him that she would simply

request a second 6-month extension of time to file the return

which, if denied, would give decedent’s estate 10 days after

notification of the denial to file the return timely.   She

advised him that decedent’s estate should enclose a $100,000

check with the request so that it would definitely not owe

anything with respect to the return.   She advised him that the

$100,000 would be refunded to decedent’s estate after its estate

tax return was filed.

     Judge Frese questioned Ms. de Mare on her advice, and she

assured him it was correct.   Judge Frese understood from his

conversations with Ms. de Mare that decedent’s estate was

entitled to request a second extension which would result in

either a 6-month extension or, at the least, the 10-day extension

referred to by Ms. de Mare.   Judge Frese accepted Ms. de Mare’s

advice and authorized her to request a second extension.    Unknown

to Judge Frese at that time, Ms. de Mare had never before

requested from the Internal Revenue Service a second extension of

time to file a Federal estate tax return.   She also had not
                                 -9-

researched whether such an extension could be requested, or

consulted Form 4768 or its instructions for guidance as to this

matter.

     By letter dated December 30, 2002, Ms. de Mare informed the

Internal Revenue Service that she and Nowell were requesting an

additional extension of time to file the estate tax return of

decedent’s estate.    The letter stated:

     We are still unable to file the estate tax return,
     although it is nearly completed, as our computerized
     tax service has self-destructed, and we cannot recall
     the completed portions of the return. We are working
     with our service to retrieve the return, and will file
     it within a few days after retrieval. Therefore an
     additional extension of time to file and to pay is
     requested.

Ms. de Mare included with the letter a $100,000 check given to

her by Judge Frese.    Ms. de Mare provided Judge Frese with a copy

of the letter.

     Ms. de Mare’s letter was received by the Internal Revenue

Service on January 6, 2003, and it was stamped “MAIL” “RECE’VED

IRS”.   The accompanying $100,000 check was cashed shortly

thereafter.   The letter with the stamp mark was returned to Ms.

de Mare shortly after January 6, 2003.     The letter as returned

did not indicate that the requested second extension was granted,

denied, or even considered.

     In February 2003, Ms. de Mare received the canceled $100,000

check with her monthly bank statement.     Shortly thereafter, she

advised Judge Frese that an additional 6-month extension had been
                                -10-

granted to decedent’s estate by virtue of the fact that the

Internal Revenue Service had cashed the $100,000 check and had

not notified her that her second request was denied.    Ms. de Mare

advised Judge Frese that the due date for the estate tax return

was now June 30, 2003.   Judge Frese questioned Ms. de Mare as to

her advice, and she assured him it was correct.

X.   Filing of Estate Tax Return of Decedent’s Estate

     On May 5, 2003, the Internal Revenue Service sent a taxpayer

delinquency notice to decedent’s estate.    Sixteen days later, Ms.

de Mare finished preparing the estate tax return of decedent’s

estate.   One week after that, Judge Frese, as executor of

decedent’s estate, signed and mailed the return to the Internal

Revenue Service.   The return contained a copy of the Form 4768

mailed to the Internal Revenue Service on June 28, 2002, and a

copy of Ms. de Mare’s letter mailed to the Internal Revenue

Service on December 30, 2002.

     The estate tax return of decedent’s estate was prepared as

though decedent had predeceased Ms. Lee and claimed a marital

deduction under section 2056 of $1,618,225.    The return also

claimed a deduction of $427,331.29 for Federal and New Jersey

estate taxes paid on the estate of Ms. Lee, asserting that those

taxes were a liability of decedent’s estate because he was

considered to have predeceased her.    The return reported that
                                  -11-

decedent’s estate had overpaid its Federal estate tax by

$124,676.40.

      Judge Frese reviewed the entire return with Ms. de Mare

before filing it.   He also questioned her at that time on certain

aspects of the return, including the reversal of the Lees’ actual

deaths in order to claim a marital deduction and a deduction for

the taxes paid on the estate of Ms. Lee.     Ms. de Mare assured

Judge Frese that the return was correct and that the claimed

deductions were proper.      Judge Frese accepted the advice of Ms.

de Mare, noting to himself that she had prepared the return

consistently with her prior advice that decedent’s estate would

receive a refund of the $100,000 paid with the second extension

request.

XI.   Notice of Deficiency

      On April 26, 2006, respondent issued a notice of deficiency

to decedent’s estate.   The notice reflected respondent’s

determination that the estate was not entitled to deduct either

the $1,618,225 or the $427,331.29 because Ms. Lee died before

decedent.   Judge Frese, acting in his capacity as executor of

decedent’s estate and with a mailing address in Hackensack, New

Jersey, petitioned the Court to redetermine respondent’s

determination.
                                 -12-

                                OPINION

I.   Accuracy-Related Penalty

      We decide first whether decedent’s estate is liable for the

accuracy-related penalty.   Respondent determined that the

accuracy-related penalty was appropriate because decedent’s

estate had improperly claimed the $1,618,225 and $427,331.29

deductions on the basis of its position that decedent was deemed

to have predeceased Ms. Lee.    We rejected that position in Estate

of Lee v. Commissioner, T.C. Memo. 2007-371.

      Pursuant to section 7491(c), respondent must produce

sufficient evidence indicating that it is appropriate to impose

the accuracy-related penalty against decedent’s estate.      See also

Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001).       Neither

party disputes (and we discern from the record) that respondent

has met this burden of production.      Petitioner thus bears the

burden of proving that the accuracy-related penalty does not

apply because of reasonable cause, substantial authority, or the

like.   See id.

      Petitioner argues that decedent’s estate is not liable for

the accuracy-related penalty because the executor of the estate,

Judge Frese, was reasonable and acted in good faith in relying on

the advice of Ms. de Mare that decedent’s estate could treat

decedent as predeceasing Ms. Lee.       Under section 6664(c)(1), an

accuracy-related penalty is not imposed upon any portion of an
                                 -13-

underpayment as to which a taxpayer acted with reasonable cause

and in good faith.     Whether the taxpayer satisfies those tests is

a factual determination, where the taxpayer’s effort to assess

the proper tax liability is a very important consideration.        See

sec. 1.6664-4(b)(1), Income Tax Regs.     Reliance on the advice of

a tax professional may constitute reasonable cause and good faith

if, under all facts and circumstances, the reliance is reasonable

and the taxpayer acted in good faith.     See Neonatology

Associates, P.A. v. Commissioner, 115 T.C. 43, 98 (2000), affd.

299 F.3d 221 (3d Cir. 2002); sec. 1.6664-4(c)(1), Income Tax

Regs.     This Court has stated that reasonable cause and good faith

is present where the record establishes by a preponderance of

evidence that:     (1) The taxpayer reasonably believes that the

professional upon whom the reliance is placed is a competent tax

adviser who has sufficient expertise to justify reliance; (2) the

taxpayer provides necessary and accurate information to the

adviser; and (3) the taxpayer actually relies in good faith on

the adviser’s judgment.    See Neonatology Associates, P.A. v.

Commissioner, supra at 99.

        We conclude that petitioner has met the reasonable cause

exception to the accuracy-related penalty because, we find, Judge

Frese relied reasonably and in good faith on the advice of Ms. de

Mare as to the legitimacy of the deductions.     Judge Frese

performed an adequate due diligence review of the qualifications
                                  -14-

of Ms. de Mare before he retained her to prepare the estate tax

return of decedent’s estate.      He reasonably concluded from his

review that Ms. de Mare was a competent estate tax attorney upon

whom he could rely in this area of tax law in which he had no

special knowledge.      He gave her all of the documents and

information that she requested to prepare the return.      He

reviewed the return in detail with her before filing it.        He

questioned her specifically on the legitimacy of the deductions.

We do not believe that Judge Frese in the setting at hand was

under any further obligation to second-guess or independently

research whether Ms. de Mare’s advice was correct.3     We hold that

decedent’s estate is not liable for the accuracy-related penalty.

II.   Addition to Tax

      We now decide whether decedent’s estate is liable for the

addition to tax for late filing.      Section 6651(a)(1) imposes an

addition to tax for failure to file a return by its due date

unless the taxpayer can establish that such failure is due to

reasonable cause and not due to willful neglect.      Because the



      3
      Respondent asserts that Judge Frese did not reasonably
believe Ms. de Mare to be a competent tax professional upon whom
he could rely. We disagree. Judge Frese is an attorney and a
longtime judge. He reviewed Ms. de Mare’s qualifications and
concluded on the basis of his review that Ms. de Mare was an
expert upon whom he could rely as to the propriety and operation
of the deemed survivorship provisions included in the Lees’
wills. He also concluded that Ms. de Mare was an expert upon
whom he could rely to prepare correctly the estate tax return of
decedent’s estate.
                                -15-

parties’ agree that the estate tax return of decedent’s estate

was filed untimely, petitioner must prove that the untimely

filing of the return was due to reasonable cause.    See sec.

7491(c); Rule 142(a); Higbee v. Commissioner, supra at 446-447.

The untimely filing would be due to reasonable cause if Judge

Frese, the executor of the estate, exercised ordinary business

care and prudence but nevertheless was unable to file the return

timely.   See sec. 301.6651-1(c)(1), Proced. & Admin. Regs.

Willful neglect denote a “conscious, intentional failure or

reckless indifference”.    United States v. Boyle, 469 U.S. 241,

245 (1985).

     Petitioner concedes that decedent’s estate was not entitled

to receive a second 6-month extension to file its estate tax

return and that Ms. de Mare’s advice to the contrary was

erroneous.    Petitioner argues that Judge Frese filed the estate

tax return late because he relied reasonably on the advice of Ms.

de Mare that decedent’s estate had received a second 6-month

extension of time to file its return.   Petitioner points the

Court to various cases where this Court has held that a

taxpayer’s reliance on the erroneous advice of an attorney as to

the due date of a return may constitute reasonable cause if the

reliance was reasonable.   See, e.g., Estate of La Meres v.

Commissioner, 98 T.C. 294, 321-324 (1992), where the Court held

that reasonable reliance on erroneous advice that a second
                                -16-

extension for the filing of an estate tax return could be

obtained beyond a 6-month extension already received was

reasonable cause for failing to file the return timely.

       We conclude that decedent’s estate is not liable for the

addition to tax because, we find, Judge Frese relied reasonably

upon Ms. de Mare’s advice that a second 6-month extension could

be and was received.    Although that advice proved to be

erroneous, the facts at hand persuade us that Judge Frese acted

diligently as to fulfilling his obligation to file the estate tax

return timely and that the late filing of the return was

attributable to his receipt of the erroneous advice from Ms. de

Mare.    We hold that decedent’s estate is not liable for an

addition to tax for untimely filing.

III.    Conclusion

       We have considered all arguments respondent has made for

contrary holdings and, to the extent not discussed, we have

rejected those arguments as without merit.


                                            Decision will be entered

                                       under Rule 155.
