- 11 -
himself the attorney for Mount Mercy in every respect insofar as
the partnership aspects were concerned. Petralia's response to
petitioner with respect to the partnership was consistent with
his obligations to his client, Mount Mercy. Where an adviser is
so closely tied to a promoter, and the taxpayer knows of this, we
do not believe the taxpayer received independent advice. Cf.
Horn v. Commissioner, 90 T.C. 908 (1988). Petralia perceived
there was the possibility of a conflict and did not offer any
significant opinion beyond that in the Memorandum. The Court of
Appeals for the Second Circuit has stated that a party "cannot
reasonably rely for professional advice on someone they know to
be burdened with an inherent conflict of interest." Goldman v.
Commissioner, supra (this is the circuit to which an appeal in
this case will lie).
Petitioner, a successful businessman, was a sophisticated,
aggressive investor. Petitioner reported wage income of $410,089
and $340,559 in 1985 and 1986, respectively. He deducted
partnership losses of $175,395 and $205,973 from a number of
partnerships for those years, respectively. It appears to us
that petitioner was familiar with partnership transactions.
Petitioner reviewed the Memorandum and the Investor
Analysis. With all the warnings in the Memorandum, some of which
we have set forth, it is clear that the purported charitable
deduction was dubious at best and might have to be defended in
court. Yet petitioner did not hesitate to take advantage of what
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