- 49 -
Petitioners' reliance on Krause v. Commissioner, 99 T.C. 132
(1992), affd. sub nom. Hildebrand v. Commissioner, 28 F.3d 1024
(10th Cir. 1994), is misplaced. The facts in the Krause case are
distinctly different from the facts of these cases. 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. Id.
at 135-136. 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
1970s and early 1980s to invest in EOR technology." Id. at 177.
In the present cases, however, as explained by respondent's
expert Steven Grossman, the price of plastics materials was not
directly proportional to the price of oil, and there is no
persuasive evidence that the so-called oil crisis had or
reasonably should have had a substantial bearing on petitioners'
decisions to invest. While EOR was, according to our Krause
opinion, in the forefront of national policy and the media during
the late 1970's and 1980's, there is no showing in these records
that the so-called energy crisis would provide a reasonable basis
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