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There is also no indication that Mr. Kipness was himself an
investor in D L & K Associates, Taylor, or any related
partnership. As a result, petitioners were not relying on
professional advice from someone they knew to be burdened with an
inherent conflict of interest. Compare Goldman v. Commissioner,
39 F.3d 402 (2d Cir. 1994) (reliance on the advice of an
interested individual supported a holding of negligence), affg.
T.C. Memo. 1993-480; Pasternak v. Commissioner, supra at 903
(same).
A failure to make even minimal inquiries regarding an
investment is ordinarily a strong indication of negligence. See
Goldman v. Commissioner, supra. We are convinced, given the
totality of the circumstances in the present case, that
petitioners' inquiries were limited because petitioners lacked
the sophistication to make the type of prudent inquiries that one
would expect a more sophisticated investor to make.
As already noted, the determination of negligence is a
highly factual matter. Respondent seeks to analogize
petitioners' situation to a number of cases where this Court has
held that the taxpayer's reliance on the advice of a professional
did not justify relief from negligence additions. We have
reviewed those cases and conclude that petitioners' situation
more closely resembles Zidanich v. Commissioner, supra (lack of
sophistication coupled with professional advice from a trusted
and seemingly knowledgeable friend or relative) where the
taxpayer was held not to be negligent. We are convinced that
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