- 49 -
tax, or final payment, like the taxpayers in Provizer v.
Commissioner, T.C. Memo. 1992-177, "except for a few weeks at the
beginning petitioners [Grelsamer and Morgan] never had any money
in the * * * [Partnership transactions]." In view of the
disproportionately large tax benefits claimed on petitioners'
1981 and 1982 Federal income tax returns, relative to the dollar
amounts invested, further investigation of the Partnership
transactions clearly was required. A reasonably prudent person
would have asked a qualified independent tax adviser if this
windfall were not too good to be true. McCrary v. Commissioner,
92 T.C. 827, 850 (1989). A reasonably prudent person would not
conclude without substantial investigation that the Government
was providing tax benefits so disproportionate to the taxpayers'
investment of their own capital.
Petitioners' reliance upon the Court of Appeals for the
Ninth Circuit's partial reversal of our decision in Osterhout v.
Commissioner, T.C. Memo. 1993-251, affd. in part and revd. in
part without published opinion sub nom. Balboa Energy Fund 1981
v. Commissioner, 85 F.3d 634 (9th Cir. 1996), is misplaced. In
Osterhout, on which petitioners rely, we found that certain oil
and gas partnerships were not engaged in a trade or business and
sustained respondent's imposition of the negligence additions to
tax with respect to one of the partners therein.3 The Court of
3 Osterhout v. Commissioner, T.C. Memo. 1993-251, affd. in
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