Lawrence R. Roberson - Page 15

                                       - 15 -                                         

               Petitioner also argues that his own investigation of the               
          music industry constituted sufficient inquiry into the                      
          Southampton investment to preclude imposition of section 6653(a)            
          negligence additions.  Negligence additions may be imposed if a             
          taxpayer fails to exercise due diligence in an investigation                
          into the bona fides of an obviously suspect transaction.                    
          Leuhsler v. Commissioner, 963 F.2d 907, 910 (6th Cir. 1992),                
          affg. T.C. Memo. 1991-179; LaVerne v. Commissioner, supra at                
          652-653.  Petitioner's education and experience as a financial              
          analyst should be considered in determining whether he was                  
          negligent in failing to conduct a good faith investigation of               
          the Southampton master recording program.  Leuhsler v.                      
          Commissioner, supra; Freytag v. Commissioner, 89 T.C. at 887-               
          889.                                                                        
               On its face, the Southampton investment should have raised             
          serious questions in the minds of ordinarily prudent investors.             
          The fact that Southampton leased petitioner a one-fourth                    
          interest in a master recording purportedly worth $850,000 for a             
          total of $10,500 which immediately generated an investment tax              
          credit of $21,250 as well as deductions equal to the amount of              
          all lease payments made should have prompted petitioner to look             
          beyond the promotional materials and to investigate the economic            
          viability of the venture.  See Allen v. Commissioner, 925 F.2d              
          348, 353 (9th Cir. 1991), affg. 92 T.C. 1 (1989) (taxpayers                 





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  Next

Last modified: May 25, 2011