In Wole Odujinrin v. IRS Commissioner the petitioner, a hematology oncologist who represented himself, did not have adequate substantiation to support his petition and was not entitled to claim a net operating loss. He was also liable for an accuracy-related penalty under IRC 6662 - the expensive kick in the shorts.
This petitioner moronically showed up with little documentation in support of his claimed deductions and had inadequate evidence to show that he correctly assessed his 2009 tax liability. He testified that he relied on the advice of a tax practitioner but that person was not present to testify at trial nor provide an affidavit.
The Tax Court ultimately ruled in this case that the petitioner failed to establish a defense based off reliance on professional advice which is an excellent defense to use but available only when you rely on the advice of a competent tax professional under Sec. 1.6664-4(c)(1),
Basically any petitioner engaging this defense needs to establish that:
1. the tax practitioner relied upon was a competent tax professional;
2. the taxpayer made full disclosure to the tax practitioner of all relevant facts; AND
3. the tax advice received from the tax practitioner was reasonably reliable
So the question in my reality becomes defining what a competent tax professional is.
In my journey it has become glaringly clear that the unregulated tax practitioner community is ripe with both fraud and incompetence. Anyone can hang their shingle claiming to be a tax professional. Hell a license is needed to cut someone's hair but not sign their tax return. This profound lack of regulation brings with it an unbelievable amount of fallout.
So when your tax return preparation gets too complicated for you to do on your own be sure to engage the services of some one with both experience and and Enrolled Agent license. That way if you are given improper advice you can rely on the defense outlined above in Tax Court.
Enrolled Agent licenses are issued by the United States Treasury Department specifically to represent taxpayers in front of the Internal Revenue Service. Generally speaking most Enrolled Agents are serious students of the US Tax Code. As federally authorized tax practitioners they tend to care deeply about their professional designation and go to great lengths to both promote and protect it. They are America's Tax Experts. Those with experience are worth every penny.