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or the substantial part of the investment be purchased by
unrelated parties." Petitioners used related parties anyway.
In one of Forsyth's draft letters, which recounted meetings
with Santandreu, C&L advised against claiming a "super royalty"
franchise payment and management fees.2 Petitioners claimed a
super royalty, i.e., 15 percent, in addition to 2 percent
management fees. Forsyth testified that documents marked "draft"
were used for discussion purposes. Notes of a subsequent
meeting, contained in C&L's files and introduced into evidence by
petitioners, specifically refer to discussions of the royalty
rates and management fees by reference to the draft document.
Thus, we believe that petitioners were aware of and disregarded
C&L's advice.
Petitioners also rely on Heasley v. Commissioner, 902 F.2d
380, 383-384 (5th Cir. 1990), revg. T.C. Memo. 1988-408, and
argue that petitioners did not have the knowledge or experience
to question their advisers. See Vorshek v. Commissioner, 933
F.2d 757, 759 (9th Cir. 1991). We find material distinctions
between the Heasleys and the officers of petitioners. Here,
petitioners' officers had considerable business experience and
were given specific requests and advice. Petitioners' officers
were able to understand what was expected of them.
2 Petitioners contend that respondent's argument on this
last point is based on an exhibit that was not received in
evidence. We rely, however, on Exhibit BGS, which was received
on May 1, 1996, and is quoted in our findings.
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