- 10 -
they approached their investment. McPike v. Commissioner, T.C.
Memo. 1996-46.
A taxpayer may avoid liability for the additions to tax
under section 6653(a)(1) and (2) by relying on competent
professional advice, if it was reasonable to rely on such advice.
United States v. Boyle, 469 U.S. 241, 250-251 (1985); Freytag v.
Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d 1011, 1017
(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. In order
for reliance on professional advice to excuse a taxpayer from the
additions to tax for negligence, the taxpayer must show that such
professional had the expertise and knowledge of the pertinent
facts to provide valuable and dependable advice on the subject
matter. Goldman v. Commissioner, 39 F.3d 402, 408 (2d Cir.
1994), affg. T.C. Memo. 1993-480; Freytag v. Commissioner, supra;
Kozlowski v. Commissioner, T.C. Memo. 1993-430, affd. without
published opinion 70 F.3d 1279 (9th Cir. 1995).
Reliance on representations by insiders, promoters, or
offering materials has been held an inadequate defense to
negligence. Goldman v. Commissioner, supra; Pasternak v.
Commissioner, 990 F.2d 893, 903 (6th Cir. 1993), affg. Donahue v.
Commissioner, T.C. Memo. 1991-181; 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
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