- 12 -
contrary, Mr. Mihara admitted at trial that he did not know much
about research and development at the time of the initial
investment in Jojoba but, nevertheless, assured petitioner there
would not be a problem with the research and development
deduction. See Hansen v. Commissioner, 820 F.2d 1464 (9th Cir.
1987); Glassley v. Commissioner, T.C. Memo. 1996-206.
Petitioner’s reliance on Heasley v. Commissioner, supra, is
misplaced. Although an investor “need not pore over every word
in a prospectus or in closing documents” before making an
investment, he must exercise reasonable care in ascertaining
basic information regarding his investment. Id. at 384. Unlike
the taxpayer in Heasley, petitioner made no effort to verify even
the most basic information regarding his investment or to ensure
that a competent and independent professional had done so on his
behalf. Moreover, after he made his investment in Jojoba,
petitioner failed to monitor his investment.
We find that petitioner’s failure to exercise reasonable
care in determining whether to invest in Jojoba was negligent and
that petitioner’s reliance on Mr. Mihara for advice regarding the
Jojoba investment was not reasonable. Accordingly, we hold that
petitioners are liable for the addition to tax for negligence
under section 6653(a)(2) with respect to a deficiency for 1982 of
$6,479.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011