- 21 -
241, 250-251 (1985); Freytag v. Commissioner, 89 T.C. 849, 888
(1987), affd. 904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S. 868
(1991). Reliance on professional advice, standing alone, is not
an absolute defense to negligence, but rather a factor to be
considered. Freytag v. Commissioner, supra. For reliance on
professional advice to excuse a taxpayer from the negligence
addition to tax, the taxpayer must show that the professional had
the expertise and knowledge of the pertinent facts to provide
informed advice on the subject matter. David v. Commissioner, 43
F.3d 788, 789-790 (2d Cir. 1995), affg. T.C. Memo. 1993-621;
Goldman v. Commissioner, 39 F.3d 402 (2d Cir. 1994), affg. T.C.
Memo. 1993-480; Freytag v. Commissioner, supra.
Reliance on representations by insiders, promoters, or
offering materials has been held an inadequate defense to
negligence. Goldman v. Commissioner, supra; 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). Pleas of reliance have been rejected when
neither the taxpayer nor the advisers purportedly relied upon by
the taxpayer knew anything about the nontax business aspects of
the contemplated venture. Freytag v. Commissioner, supra; Beck
v. Commissioner, 85 T.C. 557 (1985).
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