- 53 -
an operating loss in the amount of $19,871 and investment tax and
business energy credits totaling $41,320. For their $27,000
investment, the Selvins claimed investment tax and business
energy credits in the amount of $44,626.
The direct reductions in petitioners' Federal income tax,
from the investment tax credits alone, ranged from 149 percent to
170 percent of their cash investments, without consideration of
any rebated commissions or advance royalty payments. Therefore,
after adjustments of withholding, estimated tax, or final
payment, like the taxpayers in Provizer v. Commissioner, T.C.
Memo. 1992-177, "except for a few weeks at the beginning,
petitioners never had any money in the * * * [Partnership
transactions]." In view of the disproportionately large tax
benefits claimed on petitioners' 1981 and 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. at 850. 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.
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