The ‘Good Faith and Cause’ Defense to Penalties

By Henry Stow Lovejoy
The CPA Journal
January 2016 Edition

The gold standard for a “good faith and reasonable cause” defense to a tax penalty is reliance on advice from a professional tax advisor who is informed of all the relevant facts. But recent cases that have disallowed “hobby loss” deductions for operating a horse farm demonstrate that professional tax advice is not the only way to establish good faith and reasonable cause. These cases suggest that if taxpayers are serious about an activity, they can avoid an accuracy-related penalty.

[Read full article]