- 6 -
1990), affg. T.C. Memo. 1989-56 and T.C. Memo. 1989-189; Marcello
v. Commissioner, 380 F.2d 499 (5th Cir. 1967), affg. in part and
remanding in part 43 T.C. 168 (1964).
Citing Heasley v. Commissioner, supra, petitioners contend
that they acted in a reasonable manner and exercised ordinary
business care and prudence in claiming the deductions and credits
attributable to their participation in Encore. In support of
that contention, petitioners allege that they relied upon the
financial advice of their friend and investment adviser, Derwyn
Booker (Booker). Booker was a paid promoter for Encore.3
Under some circumstances, a taxpayer may avoid liability for
the additions to tax under section 6653(a)(1) if reasonable
reliance on a competent professional adviser is shown. United
States v. Boyle, 469 U.S. 241 (1985); 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. Freytag v. Commissioner, supra at 888.
In order for reliance on professional advice to excuse a taxpayer
from the negligence additions to tax, the reliance must be
reasonable, in good faith, and based upon full disclosure. Id.
Reliance on representations by insiders, promoters, or offering
materials has been held an inadequate defense to negligence.
3See Booker v. Commissioner, T.C. Memo. 1996-261.
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