- 64 -
93-2 USTC par. 50,585 (D. Ariz. 1993); Daoust v. Commissioner,
T.C. Memo. 1994-203; and Davis v. Commissioner, T.C. Memo. 1989-
607.
This Court rejected the negligence additions to tax in the
Davis and Daoust cases for reasons inapposite to the facts of
petitioners' cases. The taxpayers in the Davis case reasonably
relied upon a "trusted and long-term adviser" who was independent
of the investment venture, and the offering materials reviewed by
the taxpayers did not reflect that the principals in the venture
lacked experience in the pertinent line of business. In
contrast, petitioners purport to have relied on Maxfield, a
recently hired colleague contemplating a similar investment.
Maxfield acted as a conveyor of information and of his
impressions, not as an adviser with expertise in plastics
recycling, and he made it clear to petitioners and others at Sann
& Howe that it was each individual's own business decision to
make, not his. In addition, the offering memoranda warned that
the Partnerships had no prior operating history and that the
general partner had no prior experience in marketing recycling or
similar equipment.
The Daoust case involved a cattle breeding venture that this
Court had previously held lacked economic substance and a
business purpose. See Rasmussen v. Commissioner, T.C. Memo.
1992-212 (where we also held the taxpayers negligent because,
inter alia, they relied solely on representations made in the
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