Joseph and Susan L. Ferraro - Page 32




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               Under some circumstances, a taxpayer may avoid liability for           
          negligence because of the taxpayer's reasonable reliance on a               
          competent professional adviser.  See United States v. Boyle, 469            
          U.S. 241, 250-251 (1985); Freytag v. Commissioner, 89 T.C. 849,             
          888 (1987), affd. 904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S.             
          868 (1991).  However, reliance on professional advice, standing             
          alone, is not an absolute defense to negligence; rather it is a             
          factor to be considered.  See Freytag v. Commissioner, supra.               
               Petitioners claim that petitioner relied on representations            
          by Burstein and Ulanoff regarding the uniqueness of the Sentinel            
          EPE recyclers.  However, petitioner did not independently obtain            
          these individuals' advice but rather received their reports as              
          part of the promotional material that he received from                      
          Clearwater.  Burstein and Ulanoff were paid to promote the                  
          Plastics Recycling leasing programs and, in particular, the                 
          Clearwater investment.  Reliance on representations by insiders,            


               8(...continued)                                                        
          possessed the requisite expertise and knowledge of the pertinent            
          facts regarding the Clearwater transactions to provide informed             
          advice on the claimed partnership losses and tax credits, see               
          David v. Commissioner, 43 F.3d 788, 789-790 (2d Cir. 1995), affg.           
          per curiam T.C. Memo. 1993-621; Goldman v. Commissioner, 39 F.3d            
          402 (2d Cir. 1994), affg. T.C. Memo. 1993-480; Freytag v.                   
          Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d 1011 (5th             
          Cir. 1990), affd. 501 U.S. 868 (1991); or (2) what advice Parker            
          rendered with respect to either the profitability of the                    
          transaction or the claiming of tax benefits therefrom, see also             
          Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165            
          (1946), affd. 162 F.2d 513 (10th Cir. 1947).                                




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