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transactions]." In view of the disproportionately large tax
benefits claimed on petitioners' 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' arguments are not supported by 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).
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.24 The
taxpayer had relied in part upon a tax opinion contained in the
24 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),
involved a group of consolidated cases. The parties therein
agreed to be bound by the Court's opinion regarding the
application of the additions to tax provided for under sec.
6653(a), inter alia. Accordingly, although the Court's analysis
focused on one taxpayer, the additions to tax were sustained with
respect to all of the parties.
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