- 24 -
field of expertise or with respect to facts which he does not
verify. See Skeen v. Commissioner, 864 F.2d 93 (9th Cir. 1989),
affg. Patin v. Commissioner, 88 T.C. 1086 (1987); Lax v.
Commissioner, T.C. Memo. 1994-329, affd. without published
opinion 72 F.3d 123 (3d Cir. 1995). Because of the technical
nature of these investment ventures, it was unreasonable for
petitioners to rely on Tomasetti, Frabotta, or Omohundro.
Moreover, a careful consideration of the materials in the
respective offering memoranda, especially the discussions in the
prospectuses of high writeoffs and risk of audit, should have
alerted a prudent and reasonable investor to the questionable
nature of the promised deductions and credits. See Collins v.
Commissioner, 857 F.2d 1383, 1386 (9th Cir. 1988), affg. Dister
v. Commissioner, T.C. Memo. 1987-217. The preface to each
memorandum contained the following: NO OFFEREE SHOULD CONSIDER
THE CONTENTS OF THIS MEMORANDUM *** AS *** EXPERT ADVICE. ***
EACH OFFEREE SHOULD CONSULT HIS OWN PROFESSIONAL ADVISERS AS TO
LEGAL, TAX, ACCOUNTING AND OTHER MATTERS RELATING TO ANY PURCHASE
BY HIM OF UNITS. Each of the memoranda also clearly stated that
the respective Partnership transactions involved significant tax
risks and that in all likelihood the IRS would challenge the
transactions. In a "business risks" section, each warned that
there was no history for the subject partnership, no established
market for the recyclers, and that there could be no assurance
that recycled pellets would be as marketable as virgin pellets.
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