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to waive the addition. Section 6659(e) authorizes respondent to
waive all or part of the addition to tax for valuation
overstatements if taxpayers establish that there was a reasonable
basis for the adjusted bases or valuations claimed on the returns
and that such claims were made in good faith. Respondent's
refusal to waive a section 6659 addition to tax is reviewable by
this Court for abuse of discretion. Krause v. Commissioner,
supra at 179.
Petitioners urged that they relied on Greenstein, and to
some extent upon the representations and evaluations contained in
the offering memorandum, in deciding on the valuation claimed on
their tax returns. Petitioners contend that such reliance was
reasonable, and, therefore, respondent should have waived the
section 6659 addition to tax.
We have found that petitioners' purported reliance on
Greenstein and the offering memorandum was not reasonable. At
the time of the investment, petitioners knew that Greenstein was
not an engineer and had no education or experience in plastics
materials or plastics recycling. He made a very limited
investigation about the recyclers, and there is no evidence or
indication that petitioners were willing to finance a more
thorough inquiry. Nevertheless, petitioners relied exclusively
on Greenstein for the underlying viability, financial structure,
and economics of the Hyannis transaction. The investment credits
were directly dependent upon the value of the recyclers, and the
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