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to facts which he does not verify, in this case the value of the
recycler. Skeen v. Commissioner, 864 F.2d 93 (9th Cir. 1989),
affg. Patin v. Commissioner, 88 T.C. 1086 (1987).
Moreover, Storey was not an independent adviser since he was
entitled to receive compensation from Sunbelt for petitioners'
investment. Although Storey refunded the commission to
petitioners, because he was paid to sell the investment, his
advice was suspect.
Petitioners contend that they read the offering memorandum
and questioned Storey regarding its contents. The extent of
petitioners' review of the offering memorandum is unclear;
however, a review of those materials would have indicated the
numerous business and tax risks associated with an investment.
The preface to the offering memorandum warned the potential
investor not to consider its contents as expert advice and to
seek advice from the investors' own advisers. The offering
memorandum also clearly stated that the transactions involved
significant tax risks and that in all likelihood the IRS would
challenge the validity of the transactions and the purported
value of the recycling machines. The "business risks" section of
the offering memorandum warned that there was no history for
Sunbelt and that there was no established market for the
recyclers or pellets produced therefrom. Petitioner failed to
carefully consider the offering memorandum and to take into
account its warnings. Statements regarding the business and tax
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