Joseph and Susan L. Ferraro - Page 36




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          958 (1989), affd. without published opinion 921 F.2d 280 (9th               
          Cir. 1991).                                                                 
               Thus, it was not reasonable for petitioners to claim                   
          substantial tax credits and a partnership loss on the basis of              
          reports contained in the Clearwater private offering memorandum;            
          and, there is no indication that petitioners obtained                       
          professional advice from an individual with the requisite                   
          expertise and knowledge of the pertinent facts to provide                   
          informed advice regarding the claimed partnership loss and tax              
          credits.  Cf. 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); Freytag v.                        
          Commissioner, 89 T.C. 849 (1987).  Therefore, petitioners did not           
          act reasonably in claiming tax benefits relating to the                     
          Clearwater investment.                                                      
               C.  Conclusion Regarding Negligence                                    
               In view of petitioner's sophistication, petitioner knew or             
          should have known that the Sentinel EPE recyclers were not                  
          unique, that they were not worth more than $50,000 each, and that           
          Clearwater lacked economic substance and had no potential for               
          profit.  Therefore, under the circumstances of this case,                   
          petitioners failed to exercise due care in claiming a partnership           
          loss deduction and substantial tax credits with respect to                  
          Clearwater.  Taking all of the above factors into consideration,            





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