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5. Conclusion as to Negligence
Under the circumstances of these cases, petitioners failed
to exercise due care in claiming large deductions and tax credits
with respect to the Partnerships on their respective Federal
income tax returns. Petitioners did not reasonably rely upon the
offering memoranda, or on Becker, Steele, and/or Sprague, and
they did not in good faith investigate the underlying viability,
financial structure, and economics of the Partnership
transactions herein. We are unconvinced by the claims of these
highly sophisticated, able, and successful business people that
they reasonably failed to inquire about their investments and
simply relied on the offering circulars and on Steele, Sprague,
and ultimately Becker, despite warnings in the offering circulars
and explanations by Becker about the limitations of his
investigation. In each case, these taxpayers knew or should have
known better. We hold, upon consideration of the entire records,
that petitioners are liable for the negligence additions to tax
under the provisions of section 6653(a)(1) and (2) for the
taxable years at issue. Respondent is sustained on this issue.
C. Section 6659--Valuation Overstatement
Respondent determined that petitioners are each liable for
the section 6659 addition to tax on the portion of their
respective underpayments attributable to valuation overstatement.
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