- 7 -
connection with the transactions. See Henry Schwartz Corp. v.
Commissioner, 60 T.C. 728, 740 (1973). In this regard, the
determination of negligence is highly factual. "When considering
the negligence addition, we evaluate the particular facts of each
case, judging the relative sophistication of the taxpayers as
well as the manner in which the taxpayers approached their
investment." Turner v. Commissioner, T.C. Memo. 1995-363.
There are a number of special and unusual circumstances
present in petitioners' case that in combination provide a
reasonable basis for petitioners' actions. The special and
unusual circumstances include petitioners' complete lack of
sophistication in investment matters as well as the long-term
special relationship of trust and friendship that existed between
petitioners and their C.P.A.. Cf. Schwalbach v. Commissioner,
111 T.C. 215, 230-231 (1998); Zidanich v. Commissioner, T.C.
Memo. 1995-382.
Petitioners are a carpet salesman and an elementary school
teacher who did not have any independent investment experience.
They are unsophisticated investors who relied on their C.P.A., a
trusted friend and a knowledgeable professional. Because of his
reputation and status, petitioners surmised that Mr. Kipness had
the expertise to choose an appropriate investment for them.
Because of their friendship, petitioners were confident that Mr.
Kipness would do all that was necessary to protect their
investment. In sum, petitioners relied in good faith on a
financially savvy accountant and their long-time friend to act in
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