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F.2d 1464, 1469 (9th Cir. 1987); Haman v. Commissioner, 500 F.2d
401, 403 (9th Cir. 1974), affg. T.C. Memo. 1972-118.
Petitioners contend that they were not negligent. They
argue that they did extensive computer and software-related
research before investing in Century. They testified that they
believed their product had great potential, was earning income
until the Internal Revenue Service (IRS) investigation began, and
was valued reasonably compared to similar products. Petitioners
also argue that it is unrealistic to hold them negligent because
it took respondent 2 years to discover that Century had defrauded
its investors.
Petitioner's research for the software he used in his
business was not related to research for the accounting software
investment. An inquiry into the best computer system for a
business is much different than an inquiry whether an accounting
program will be a financial success. We disagree with
petitioner’s claim that he adequately investigated the Century
program.
Petitioners contend that they reasonably relied on people
who held themselves out to be experts, i.e., the management of
the companies in which they invested. Petitioners argue that
they lacked expertise and financial sophistication and that
"due care does not require moderate-income investors * * * to
independently investigate their investments", quoting Heasley v.
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