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Petitioners' Arguments
Petitioners raise a plethora of arguments against their
liability for the negligence addition to tax. Among the
arguments raised are that petitioners: (a) Were
"unsophisticated" investors with no formal training or work
experience in investments; (b) relied on their accountant,
Corman, in making the investment; (c) having obtained the
"approval" of their accountant, should not be required to conduct
a costly, independent investigation of the investment; (d)
determined that the investment in oil and gas was by its nature
"risky", profit-motivated, and "small" with a potentially high
rate of return, and did not offer tax benefits that were "too
good to be true".
Whether a taxpayer had a subjective profit motive is not
dispositive in determining that he acted negligently. Klieger v.
Commissioner, T.C. Memo. 1992-734. Under some circumstances,
however, a taxpayer may avoid liability for the additions to tax
for negligence under section 6653(a) if reasonable reliance on a
competent professional adviser is shown. Leonhart v.
Commissioner, 414 F.2d 749, 750 (4th Cir. 1969), affg. T.C. Memo.
1968-98; Freytag v. Commissioner, 89 T.C. 849, 888 (1987), affd.
904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991). Such
reliance is not an absolute defense to negligence but is merely a
factor to be considered. Freytag v. Commissioner, supra.
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