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(10th Cir. 1994), and Rousseau v. United States, 71A AFTR 2d 93-
4294, 91-1 USTC par. 50,252 (E.D. La. 1991), is misplaced. In
the Krause case, the taxpayers invested in limited partnerships
whose investment objectives concerned enhanced oil recovery (EOR)
technology. The Krause opinion states that during the late
1970's and early 1980's, the Federal Government adopted specific
programs to aid research and development of EOR technology. In
holding that the taxpayers in the Krause case were not liable for
the negligence additions to tax, this Court noted that one of the
Government's expert witnesses acknowledged that "investors may
have been significantly and reasonably influenced by the energy
price hysteria that existed in the late 1970's and early 1980's
to invest in EOR technology." Krause v. Commissioner, supra at
177. Similarly, in Rousseau v. United States, supra, the
District Court rejected the negligence additions to tax because,
inter alia, the property underlying the investment was equipment
capable of producing ethanol, which was widely considered at that
time to be a viable fuel alternative to oil, and its potential
for profit was apparent.
In the present case, however, as explained by respondent's
expert Grossman (and the May 1981 Modern Plastics article
submitted by petitioners), the price of plastics materials is not
directly proportional to the price of oil. The Krause and
Rousseau cases involved ventures in which the so-called oil
crisis provided a reasonable basis for the respective taxpayers'
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