                   T.C. Summary Opinion 2007-35



                      UNITED STATES TAX COURT



                 BRADLEY D. BECNEL, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23877-04S.              Filed March 6, 2007.



     Bradley D. Becnel, pro se.

     Scott T. Welch, for respondent.



     COUVILLION, Special Trial Judge:   This case was heard

pursuant to section 7463, I.R.C., in effect when the petition was

filed.1   The decision to be entered is not reviewable by any

other court, and this opinion should not be cited as authority.




     1
      Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year at issue.
                                 - 2 -

     Respondent determined a deficiency of $25,417 in

petitioner’s Federal income tax for 2002 and an accuracy-related

penalty under section 6662(a) of $5,083.    Petitioner concedes the

deficiency but challenges the accuracy-related penalty.    The sole

issue, therefore, is whether petitioner is liable for the

accuracy-related penalty under section 6662(a) for 2002.

     Some of the facts were stipulated, and those facts, with the

annexed exhibits, are so found and are incorporated herein by

reference.   Petitioner was a legal resident of the State of

Louisiana at the time the petition was filed.

     A notice of deficiency was issued to petitioner for 2002

based upon his failure to include as income on his Federal income

tax return for that year payments that had been made to him by

four payors.   These payments had been reported as income to the

Internal Revenue Service on information returns.   Petitioner does

not challenge the payments as includable in gross income, the

amounts which were as follows:


     Donaldson/Lufkin/Jenrette Securities          $75,711
     Hibernia National Bank                          5,000
     Ordinary dividends                                447
     Capital gain dividends                             98
       Total                                       $81,256


Respondent also determined that petitioner is liable for an

accuracy-related penalty of $5,083 under section 6662(a) for
                               - 3 -

negligence or disregard of rules or regulations and for a

substantial understatement of income tax.

     During the year 2002, petitioner was a student at Loyola

University New Orleans College of Law.   Petitioner graduated from

the College of Law in 2003.   With respect to the determination in

the notice of deficiency, he alleged in his petition:


     In 2002, while attending Loyola Law School, I acquired a
     severe eye infection in both eyes which required
     hospitalization and consults from physicians in Texas and
     Louisiana. Because I was unable to see/read, I submitted
     all of my tax documents to Thomas Vicknair, who prepared my
     return in 2002 and the previous 4 or 5 years. In 2003, Mr.
     Vicknair had a sudden stroke/heart attack and died in 2003.
     Because he was a sole proprietor, I have had difficulty
     retrieving many of my tax documents from his widow. I
     reasonably relied on the professional tax advice provided by
     Mr. Vicknair and because of his untimely and sudden death, I
     am unable to explain why he neglected to claim certain
     income despite being provided with proof of same. Because
     of my own health problems, particularly my impaired vision,
     I was unable to verify the contents of my return in 2002
     despite reasonable efforts.


     With respect to the sole issue before the Court, section

6662(a) imposes an accuracy-related penalty in the amount of 20

percent of any portion of an underpayment of tax that is

attributable to causes set forth in subsection (b).   However,

under section 6664(c)(1), no penalty shall be imposed under

section 6662(a) with respect to any portion of an underpayment if

it is shown that there was reasonable cause for the underpayment

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

underpayment.   The Commissioner has the burden of production with
                                - 4 -

respect to the penalty, but the taxpayer retains the burden of

proving reasonable cause.   Sec. 7491(c); Higbee v. Commissioner,

116 T.C. 438, 448 (2001).

     Section 6662(b) provides that the causes justifying the

imposition of the accuracy-related penalty include, inter alia:

(1) Negligence or disregard of rules or regulations, and (2) any

substantial understatement of income tax.    “Negligence” is

defined, for purposes of section 6662, as “any failure to make a

reasonable attempt to comply with the provisions of the internal

revenue laws or to exercise ordinary and reasonable care in the

preparation of a tax return”.   Sec. 1.6662-3(b)(1), Income Tax

Regs.   Section 6662(c) defines “disregard” as “any careless,

reckless, or intentional disregard”.

     Under section 6662(d)(1)(A), a substantial understatement

exists where the amount of the understatement exceeds the greater

of 10 percent of the tax required to be shown on the return for

the taxable year at issue or $5,000.    For purposes of section

6662(d)(1), “understatement” is defined as the excess of tax

required to be shown on the return over the amount of tax that is

shown on the return, reduced by any rebates.    Sec. 6662(d)(2)(A).

The understatement is reduced by the portion of the

understatement attributable to an item for which there was either

substantial authority for its treatment or adequate disclosure of
                                - 5 -

the relevant facts and a reasonable basis for its treatment.

Sec. 6662(d)(2)(B).

     Petitioner reported a tax due of $21,528 on his Federal

income tax return for 2002.    He failed to include on his return

the income reported on Forms 1099-B, Proceeds From Broker and

Barter Exchange Transactions, and 1099-DIV, Dividends and

Distributions, outlined above, for the year at issue.    Aside from

failing to disclose on the return the relevant facts related to

these items of income, petitioner has not presented any

substantial authority for his failure to include these items on

his return.   Because the understatement exceeds both 10 percent

of the total tax required to be shown on the return and $5,000,

there was a substantial understatement of tax.2   Sec.

6662(d)(1)(A).    Consequently, the penalty under section 6662(a)

applies unless petitioner had reasonable cause for the

underpayment and acted in good faith with respect to the

underpayment.    Sec. 6664(c)(1).

     The determination of whether a taxpayer acted with

reasonable cause and in good faith is made on a case-by-case

basis, taking into account all of the relevant facts and


     2
      Petitioner’s Form 1040, U.S. Individual Income Tax Return,
for 2002 showed a tax due in the amount of $21,528. The total
tax required to be shown on the return was $46,945. Thus,
petitioner understated his income tax liability by $25,417. This
amount exceeds both $4,694.50, 10 percent of the total tax
required to be shown on the return, and $5,000.
                                 - 6 -

circumstances.   Sec. 1.6664-4(b)(1), Income Tax Regs.     The most

important factor is the extent of the taxpayer’s effort to assess

his proper tax liability.    See id.     An honest misunderstanding of

fact or law that is reasonable in light of the experience,

knowledge, and education of the taxpayer may indicate reasonable

cause and good faith.     Remy v. Commissioner, T.C. Memo. 1997-72.

Further, reliance by the taxpayer on the advice of a qualified

adviser constitutes reasonable cause and good faith, if, under

all of the facts and circumstances, the reliance by the taxpayer

was reasonable and the taxpayer acted in good faith.      Sec.

1.6664-4(b)(1), Income Tax Regs.

     In his petition, petitioner alleges that his health-related

problems rendered him incapable of verifying the accuracy of his

2002 income tax return.    He contends that an infection in both

eyes left him unable to see or read in April 2003, the time when

the return for taxable year 2002 was filed.      At trial, petitioner

testified that he acquired a serious bacterial infection in his

left eye sometime in October 2001.       He acknowledged that his eyes

were examined by a professional, and that the infection’s effects

were limited to his left eye.    Notwithstanding the infection in

his left eye, petitioner was able to finish his coursework at

Loyola University New Orleans College of Law, take his exams, and

graduate from law school in 2003.      Because the infection, which

originated in October 2001, only impaired one eye, the Court is
                               - 7 -

not convinced that he was unable to see, as petitioner asserted

in his petition, and was incapable of verifying the information

on his income tax return for the year at issue.

     Petitioner also contends in his petition that Thomas

Vicknair (Mr. Vicknair), his accountant and return preparer,

despite receiving information returns for petitioner for taxable

year 2002, failed to include these items of income on his 2002

income tax return.   Petitioner alleged and testified that Mr.

Vicknair died after preparing petitioner’s 2002 return and that

petitioner had difficulty obtaining his tax information from Mr.

Vicknair’s estate.   Daniel E. Becnel, Jr. (Mr. Becnel),

petitioner’s father, testified at trial that Mr. Vicknair was a

banker who served as the family’s bookkeeper, that Mr. Vicknair

ordinarily prepared the family’s returns, and that he died on

December 31, 2002.   When questioned as to how Mr. Vicknair could

have prepared petitioner’s 2002 income tax return in April 2003,

since Mr. Vicknair died on December 31, 2002, Mr. Becnel

testified that Mr. Vicknair did not, as alleged in the petition,

prepare petitioner’s return for the year at issue.   Accordingly,

petitioner’s contention that he reasonably relied on Mr.

Vicknair’s professional tax advice when filing the income tax

return for 2002 is unfounded, since Mr. Vicknair died without

preparing petitioner’s return for the year at issue.
                               - 8 -

     According to Mr. Becnel’s testimony, after Mr. Vicknair

died, Mr. Becnel contacted Mr. Vicknair’s widow, requested his

family’s tax records, and provided them to a different return

preparer.   Mr. Becnel testified that he assumed Mr. Vicknair’s

widow had provided him with all the information necessary to

prepare petitioner’s 2002 return.   Mr. Becnel further testified

that the failure to report the income at issue did not come to

his attention until petitioner received the notice of deficiency

for 2002.   The sole issue is whether petitioner acted in good

faith and with reasonable cause in the filing of his 2002 Federal

income tax return under the scenario described.

     Even if the Court were to accept petitioner’s contention

that he did not receive the Forms 1099-B and 1099-DIV for taxable

year 2002 from Mr. Vicknair’s widow, that fact does not establish

per se reasonable cause for the understatement of income tax or

good faith on petitioner’s part.    The facts and circumstances in

this case indicate that petitioner exerted little effort to

assess his proper tax liability for 2002.   Mr. Becnel testified

that stockbrokers managed the accounts that gave rise to

petitioner’s omitted income and that petitioner never received a

report or other information that would show how petitioner’s

accounts performed in 2002.3   Although petitioner might not have


     3
      All of the monthly reports and other information related to
these accounts were, at Mr. Becnel’s behest, sent directly to the
                                                   (continued...)
                               - 9 -

had sufficient information to determine his precise tax liability

for 2002, he did not attempt to estimate the omitted income he

received during the year at issue.     Petitioner could have

approximated his investment income based on past annual reports

or previously filed returns.   Knowing that the accounts that

produced the omitted income existed, petitioner could have

contacted the businesses where these accounts were located and

requested that copies of the Forms 1099-B and 1099-DIV or

duplicates thereof be sent to him.     Even if petitioner were

unable to obtain any information regarding the omitted income

prior to filing his income tax return for 2002, he could have

attached a statement to the return explaining the relevant facts

and circumstances and indicating that an amended return would

later be filed.   Instead, petitioner relied upon his father to

assess his tax liability and ignored the matter until respondent

issued the notice of deficiency.

     While the Court sympathizes with petitioner and understands

the difficulties, financial and otherwise, he encountered from

his bacterial infection and Mr. Vicknair’s death, those


     3
      (...continued)
brokers who managed the accounts. These brokers provided Mr.
Becnel and his family with annual updates concerning their
accounts’ performances. Because most people monitor their
investments, the Court inquired as to why petitioner’s financial
affairs were not so monitored. Mr. Becnel addressed this concern
by testifying: “Well, when you do the tobacco settlement, and
you settle the case for $287 billion, and you get paid four times
a year, money is irrelevant.”
                              - 10 -

difficulties, in the Court’s view, did not constitute reasonable

cause for an understatement of Federal income tax within the

meaning of section 6664(c).   Income was knowingly omitted from

petitioner’s return, and he did not include any information with

the return that would have alerted respondent that the omitted

income and the tax due thereon would be reported later when the

necessary information would be available.    The record, therefore,

reflects that petitioner failed to make a sufficient effort to

ascertain his proper tax liability for 2002.       Accordingly,

respondent is sustained on the imposition of the accuracy-related

penalty under section 6662(a).

     Reviewed and adopted as the report of the Small Tax Case

Division.




                                      Decision will be entered

                                 for respondent.
