-8-
(9th Cir. 1991); Industrial Valley Bank & Trust Co. v.
Commissioner, 66 T.C. 272, 283 (1976). Reliance on professional
advice, by itself, is not an absolute defense to negligence. A
taxpayer first must demonstrate that his reliance was reasonable.
Freytag v. Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d
1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991).
A taxpayer's reliance on representations by insiders,
promoters, or offering materials can be an inadequate defense to
negligence. 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 nom. Cowles v. Commissioner, 949 F.2d
401 (10th Cir. 1991). Reliance on a professional adviser can be
inadequate when the taxpayer and his adviser knew nothing about the
nontax business aspects of the venture. Beck v. Commissioner, 85
T.C. 557 (1985); Flowers v. Commissioner, 80 T.C. 914 (1983). In
order for reliance on professional advice to excuse a taxpayer from
the negligence additions to tax, the reliance must be reasonable,
in good faith, and based upon full disclosure. Freytag v.
Commissioner, supra at 888.
Petitioner contends that he is not liable for the section
6653(a)(1) and (2) additions to tax. He argues that he had the
"expertise and intelligence" to properly evaluate the quality of
the investment because of his experience as a medical doctor in
sports medicine, his knowledge of continuing medical education
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011