- 7 -7
Petitioners contend that in addition to relying on the
prospectus, the tax opinion presented by Henry Nunez (Nunez), who
was legal counsel on behalf of Encore Leasing, and Orsi's due
diligence, they sought the independent advice of their attorney
and accountant. We have stated above that reliance on
representations by insiders, promoters, or offering materials
generally is not an adequate defense to negligence. Gollin v.
Commissioner, supra. It is clear that Orsi was a promoter. At
the very least, both Orsi and Nunez were insiders. Any
information they provided petitioners regarding investment
opportunities in the Alamo partnerships was self-serving. As the
promoter, Orsi had a stake in whether the Alamo partnerships were
successful in securing investors. Thus, Orsi had an inherent
conflict of interest. Under these circumstances, petitioners
cannot show that Orsi reached his decisions independently when he
advised them. Orsi cannot be considered a disinterested source.
Petitioners' reliance on Orsi was not objectively reasonable.
Notwithstanding that petitioners failed to produce a copy of any
prospectus or any tax opinion prepared by Nunez, petitioners'
reliance on such material also cannot be said to be reasonable.
Reliance on offering materials is not an adequate defense to
negligence. Gollin v. Commissioner, supra.
As for petitioners' contention that they are not liable for
the additions to tax due to negligence because they relied on the
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