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of $40,174. In the first year of the investment alone,
petitioners claimed an operating loss in the amount of $30,510
and investment tax and business energy credits related to
Northeast totaling $63,612, while petitioners' investment in
Northeast was only $37,500. The direct reductions in their
Federal income tax, via the tax credits, equaled 170 percent of
their cash investment. Therefore, like the taxpayers in Provizer
v. Commissioner, T.C. Memo. 1992-177, "except for a few weeks at
the beginning, petitioners never had any money in the [Northeast]
deal." A reasonably prudent person would not conclude without
substantial investigation that the Government was providing tax
benefits so disproportionate to the taxpayers' investment of
their own capital. A reasonably prudent person would have asked
a qualified independent tax adviser if this windfall were not too
good to be true. McCrary v. Commissioner, 92 T.C. 827, 850
(1989).
Petitioners have not distinguished their situation from that
of the taxpayers in Provizer v. Commissioner, supra, where the
negligence additions to tax were upheld. We hold, upon
consideration of the entire record, that petitioners are liable
for the negligence additions to tax under the provisions of
section 6653(a)(1) and (2). Respondent is sustained on this
issue.
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