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A taxpayer may not have to investigate "every detail" of an
investment, but petitioner failed to investigate any detail of
her investment in Republic. She, a college graduate and
independent businesswoman, failed even to take the most basic
step of asking for and reading the pertinent portions of an
offering memorandum describing the recycling program. Instead,
petitioner chose to invest an amount representing 40 percent of
her 1982 reported taxable income in reliance on the advice of a
return preparer about whose professional credentials she had no
knowledge.
Petitioner's curiosity was apparently not even piqued by
her recovery of her $7,500 "investment" and an immediate "profit"
of over $5,000 (considering Federal tax deductions and credits),
no matter what happened to the recycler program as a business. A
reasonably prudent person would have asked a competent tax
adviser if this windfall were not "'too good to be true'". See
Pasternak v. Commissioner, 990 F.2d 893, 903 (6th Cir. 1993)
(quoting McCrary v. Commissioner, 92 T.C. 827, 850 (1989)), affg.
Donahue v. Commissioner, T.C. Memo. 1991-181.
Petitioner should have exercised the same standard of care
in considering the Republic recycling investment as she routinely
exercised in her position as a buyer for Maas Bros and, we
presume, in running her own business. Based on this record, we
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