- 23 -
Petitioners essentially argue that their reliance on Bachmann,
Schwartz and the offering materials insulates them from the
negligence additions to tax.
Under some circumstances a taxpayer may avoid liability for
the additions to tax under section 6653(a)(1) and (2) if
reasonable reliance on a competent professional adviser is shown.
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. Id. 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.;
see Weis v. Commissioner, 94 T.C. 473, 487 (1990); Ewing v.
Commissioner, 91 T.C. 396, 423-424 (1988), affd. without
published opinion 940 F.2d 1534 (9th Cir. 1991); Pritchett v.
Commissioner, 63 T.C. 149, 174-175 (1974).
Reliance on representations by insiders, promoters, or
offering materials has been held an inadequate defense to
negligence. LaVerne v. Commissioner, 94 T.C. 637, 652-653
(1990), affd. without published opinion 956 F.2d 274 (9th Cir.
1992), affd. without published opinion sub nom. Cowles v.
7(...continued)
a primary adviser with respect to petitioners' investment in the
Partnerships, although he was the primary tax specialist at
Bachmann, Schwartz.
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