- 33 -
promoters, or offering materials has been held to be an
inadequate defense to negligence. See Goldman v. Commissioner,
39 F.3d 402 (2d Cir. 1994), affg. T.C. Memo. 1993-480; LaVerne v.
Commissioner, 94 T.C. 637, 652-653 (1990), affd. without
published opinion 956 F.2d 274 (9th Cir. 1992), affd. in part
without published opinion sub nom. Cowles v. Commissioner, 949
F.2d 401 (10th Cir. 1991).
What is more, the record demonstrates that petitioner either
did not thoroughly review the offering memorandum or chose to
ignore certain portions thereof. The offering memorandum
included numerous caveats and warnings regarding the business
risks of the Clearwater transactions (including the general
partner's lack of experience in marketing recycling or similar
equipment and the lack of an established market for the
recyclers) and the risks involved in claiming tax benefits
therefrom. It also included a statement that "each offeree
should consult his own professional advisors as to legal, tax,
accounting and other matters relating to any purchase by him of
units". Therefore, even the offering memorandum warned
petitioner that he should not rely on Burstein or Ulanoff for
either business or tax advice. A careful consideration of the
offering memorandum, especially the discussion of high writeoffs
and the risk of audit, would have alerted a prudent investor to
question the nature of the promised tax benefits. We certainly
Page: Previous 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 NextLast modified: May 25, 2011