- 67 -- 67 -
of Appeals have affirmed decisions of the Tax Court imposing
negligence additions to tax. See Chakales v. Commissioner, T.C.
Memo. 1994-408 (reliance on long-term adviser, who was a tax
attorney and accountant, and who in turn relied on a promoter of
the venture, held unreasonable), affd. 79 F.3d 726 (8th Cir.
1996); Kozlowski v. Commissioner, T.C. Memo. 1993-430 (reliance
on adviser held unreasonable absent a showing that the adviser
understood the transaction and was qualified to give an opinion
whether it was bona fide), affd. without published opinion 70
F.3d 1279 (9th Cir. 1995); Freytag v. Commissioner, 89 T.C. 849
(1987) (reliance on tax advice given by attorneys and C.P.A.'s
held unreasonable absent a showing that the taxpayers consulted
any experts regarding the bona fides of the transactions), affd.
904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991). Here
we have found that none of the advisers consulted by petitioners
possessed sufficient knowledge of the plastics recycling business
to render a competent opinion.14 This circumstance has been
deemed relevant by the Court of Appeals for the Second Circuit,
the court to which appeal in these cases lies. See David v.
Commissioner, 43 F.3d at 789-790 (taxpayers' reliance on expert
14 Fredericks purports to have spoken to Porter, a licensed
engineer and the president of a plastics molding company that at
the time was recycling plastic. However, Porter did not testify
at trial, and Fredericks did not establish the extent of Porter's
expertise in plastics recycling, if any. Moreover, when
Fredericks spoke with Porter by telephone they did not discuss
the Plastics Recycling transactions or the Sentinel EPE
recyclers.
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