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EPE recyclers or hire an expert in plastics to evaluate the
Empire transaction. This inattention to the machinery involved
in the transaction is particularly telling since petitioners each
had experience in pricing and selling machinery and ready access
to IMCO, an Ingersoll-Rand subsidiary involved in plastics and
which Bennett believed used pellets like those produced by the
Sentinel EPE recycler. The facts of petitioners' cases are
distinctly different from the Rousseau case. Accordingly, we do
not find petitioners' arguments with respect to the Rousseau case
applicable.
In each of the cases before us, petitioners' investigation
of the Empire transaction and the Sentinel EPE recyclers was
limited to conversations with Gallagher and other Ingersoll-Rand
executives and examination of the Empire offering materials.
Nonetheless, petitioners argue that their reliance on Gallagher
and the representations in the offering materials insulate them
from the negligence additions to tax.
Under some circumstances a taxpayer may avoid liability for
the additions to tax under section 6653(a)(1) and (2) if
reasonable reliance on a competent professional adviser is shown.
Freytag v. Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d
1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991). Reliance on
professional advice, standing alone, is not an absolute defense
to negligence, but rather a factor to be considered. Id. In
order for reliance on professional advice to excuse a taxpayer
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