- 49 -
profitable.16 Feinstein spoke to Lauren, but their discussion
was limited to Lauren's impression of PI. Lauren did not read an
offering memorandum, see a Sentinel EPE recycler, or do any type
of investigation into the plastics recycling market. Neither
petitioners nor their purported advisers hired any independent
experts in the field of plastic materials or plastics recycling.
They relied upon the offering materials and representations by
insiders to the Plastics Recycling transactions. Accordingly, we
consider petitioners' arguments with respect to the Mollen case
inapplicable under the circumstances of these cases.
Petitioners' reliance upon the Court of Appeals for the
Ninth Circuit's partial reversal of our decision in Osterhout v.
Commissioner, supra, is misplaced. In Osterhout, we found that
certain oil and gas partnerships were not engaged in a trade or
business and sustained the Commissioner's imposition of the
negligence additions to tax with respect to one of the partners
therein.17 The Court of Appeals for the Ninth Circuit reversed
16 Alter claimed that he spoke to Ferraro, who apparently
worked for one or more summers at a plastics company, and
Carroll, who purportedly had an engineering background. However,
neither Ferraro nor Carroll testified in these cases, and the
records fail to establish that they were qualified to analyze the
Sentinel EPE recycler or the Plastics Recycling transactions.
Further, Feinstein testified that he did not believe Ferraro or
any of the other members of Shea & Gould that he spoke with had
any education or experience in the plastics industry.
17 Osterhout v. Commissioner, T.C. Memo. 1993-251, affd. in
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