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not engaged in a trade or business and sustained respondent's
imposition of the negligence additions to tax with respect to one
of the partners therein.6 The Court of Appeals for the Ninth
Circuit reversed our imposition of the negligence additions to
tax. Petitioners point out that the taxpayer in that case relied
in part upon a tax opinion contained in the offering materials.
However, petitioners did not read the Plymouth offering
memorandum, let alone the tax opinion appended thereto.
Moreover, the Plymouth offering memorandum warned
prospective investors that the accompanying tax opinion letter
was not in final form and was prepared for the general partner,
and that prospective investors should consult their own
professional advisers with respect to the tax benefits and tax
risks associated with Plymouth. The tax opinion letter
accompanying the Plymouth offering memorandum was addressed
solely to the general partner and began with the following
opening disclaimer:
This opinion is provided to you for your individual
guidance. We expect that prospective investors will
rely upon their own professional advisors with respect
to all tax issues arising in connection with their
6 Osterhout v. Commissioner, T.C. Memo. 1993-251, affd. in
part and revd. in part without published opinion sub nom. Balboa
Energy Fund 1981 v. Commissioner, 85 F.3d 634 (9th Cir. 1996),
involved a group of consolidated cases. The parties therein
agreed to be bound by the Court's opinion regarding the
application of the additions to tax under sec. 6653(a), inter
alia. Accordingly, although the Court's analysis focused on one
taxpayer, the additions to tax were sustained with respect to all
of the taxpayers.
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