Albert R. and Phyllis F. Dworkin - Page 17

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            entirely from petitioner's acquaintance with Grant.  As to                                     
            petitioner's reliance on the offering memorandum, the record                                   
            indicates that petitioner either did not read the offering                                     
            memorandum in its entirety or was careless when doing so.                                      
                  Petitioners' reliance on Epsten v. Commissioner, T.C. Memo.                              
            1991-252, is misplaced.  The taxpayers in Epsten invested in a                                 
            grantor trust that sold and leased IBM computers.  The activities                              
            of the trust were not an economic sham; they had economic                                      
            substance.  There was a reasonable possibility of an economic                                  
            profit to both the trust and the taxpayers apart from the                                      
            attendant tax benefits.  Both the trust and the taxpayers had an                               
            actual and honest profit objective with respect to the                                         
            transactions at issue.  While the taxpayers in the Epsten case                                 
            conceded disallowance of the tax benefits because they were not                                
            at risk pursuant to section 465, the Court did not find them                                   
            negligent under section 6653(a).  However, it was not the                                      
            taxpayers' reliance on the offering memorandum and other                                       
            documents that absolved them of negligence.  Rather, at the time                               
            of their investment there was little case law interpreting the                                 
            recently enacted section 465(b)(4).  Consequently, there were no                               
            indications that the professional advice given the taxpayers was                               
            not reasonable.                                                                                
                  In the instant case, petitioners invested in a transaction                               
            that had no economic substance, and neither they nor Northeast                                 
            could have reasonably expected to realize an economic profit.                                  

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