- 69 -
published opinion 94 F.3d 651 (9th Cir. 1996); Chakales v.
Commissioner, T.C. Memo. 1994-408 (reliance on long-term adviser,
who was a tax attorney and accountant, and who in turn relied on
a promoter of the venture, held unreasonable), affd. 79 F.3d 726
(8th Cir. 1996); Kozlowski v. Commissioner, T.C. Memo. 1993-430
(reliance on adviser held unreasonable absent a showing that the
adviser understood the transaction and was qualified to give an
opinion whether it was bona fide), affd. without published
opinion 70 F.3d 1279 (9th Cir. 1995); Freytag v. Commissioner, 89
T.C. at 849 (reliance on tax advice given by attorneys and
C.P.A.'s held unreasonable absent a showing that the taxpayers
consulted any experts regarding the bona fides of the
transactions).
The records in the cases before us fail to establish that
Maxfield possessed sufficient knowledge of the plastics or
recycling industries to render a competent opinion.27 This fact
has been deemed relevant by the Court of Appeals for the Second
Circuit, the court to which appeal in these cases lies. See
David v. Commissioner, 43 F.3d at 789-790 (taxpayers' reliance on
expert advice not reasonable where expert lacks knowledge of
27 As explained in more detail above, Maxfield relied upon the
representations in the offering memoranda and the reports of
Ulanoff and Burstein for the value of the Sentinel EPE recycler,
which generated the tax benefits in these cases. He did not
independently confirm such representations and, recognizing this,
told the members of Sann & Howe that the only way to confirm the
fair market value of a Sentinel recycler would be to hire an
independent expert or appraiser.
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