- 37 -
refusal to exercise discretion is arbitrary, capricious, or
unreasonable. See Mailman v. Commissioner, 91 T.C. 1079 (1988);
Estate of Gardner v. Commissioner, 82 T.C. 989 (1984); Haught v.
Commissioner, T.C. Memo. 1993-58.
Petitioner urges that he relied upon Marcus, Hefter, and the
offering memorandum in deciding on the valuation he and his wife
claimed on their tax return. He contends that such reliance was
reasonable, and, therefore, that respondent should have waived
the section 6659 addition to tax. However, as we explained above
in finding petitioners liable for the negligence additions to
tax, petitioner's purported reliance on Marcus, Hefter, and the
offering memorandum was not reasonable. Petitioner's review of
the offering memorandum was inadequate. Marcus and Hefter had no
expertise in plastics materials or plastics recycling. Hefter
only read the offering memorandum, and petitioner failed to learn
what, if anything, Marcus had done.
We hold that petitioners did not have a reasonable basis for
the adjusted basis or valuation claimed on their tax return with
respect to the investment in Resource. In the instant case,
respondent could find that petitioner's reliance on Marcus,
Hefter, and the offering memorandum was unreasonable. The record
in this case does not establish an abuse of discretion on the
part of respondent but supports respondent's position. We hold
that respondent has satisfied the burden of showing that
respondent's refusal to waive the section 6659 addition to tax in
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