- 25 -
1383, 1386 (9th Cir. 1988), affg. Dister v. Commissioner, T.C.
Memo. 1987-217.
The Gilmores', Wilson's, and G&W's contention that they
reasonably relied upon Stewart's advice is further undermined by
their successful business backgrounds. In view of their success
in the construction business and profitable real estate
investments, we find it difficult to accept the proposition that
they did not know or have reason to know that the value of the
recyclers was grossly overstated. We find it more likely than
not that they were so interested in the expected tax benefits
that would result from the investment that they failed to
investigate and seek advice on the underlying transactions that
were to generate those tax benefits. Our conclusion on this
point is supported by the fact that the Gilmores' and Wilson's
investments in Southeast, which were not consistent with their
prior investment histories, occurred in a year that capital
transactions were expected to, and did, generate large capital
gains.
The Gilmores, Wilson, and G&W also contend that the
investment was reasonable because they expected to make a profit.
We have severe reservations about the validity of their claims on
this point; however, even if true, their profit motives are not
dispositive of the issue here in dispute. Whether or not they
intended to profit from their investments in Southeast, they
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011