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CONSULT HIS OWN PROFESSIONAL ADVISERS. Petitioners were
experienced in pricing machinery, yet they did not make the
effort personally to see a Sentinel EPE recycler or independently
investigate the machinery prior to investing in Empire.
Petitioners' reliance on Krause v. Commissioner, supra,
Rousseau v. United States, supra, and Mauerman v. Commissioner,
supra, in support of their contention that they acted reasonably,
is misplaced. In the Krause and Rousseau cases, the section 6659
addition to tax was disallowed in light of the respective
holdings that the taxpayers in each case had a reasonable basis
for the valuations claimed on the tax returns or had reasonable
cause for the understatement on the return and were not subject
to negligence additions to tax. In contrast, we have held that
petitioners herein did not act reasonably in claiming deductions
and investment tax credits related to Empire, that the errors on
petitioners' tax returns were caused by the excessive valuations
of the underlying machinery in the Empire transaction, that
petitioners lacked reasonable cause for such overvaluation, and
that each petitioner is therefore liable for the negligence
additions to tax under section 6653(a). See supra pp. 14-28.
Accordingly, petitioners' reliance on the Krause and Rousseau
cases is misplaced.
In Mauerman v. Commissioner, supra, the Tenth Circuit Court
of Appeals held that the Commissioner had abused her discretion
by failing to waive a section 6661 addition to tax. Like section
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