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Reliance upon disinterested expert advice may satisfy the prudent
person standard, but only when the taxpayer has shown that he
provided correct and complete information to an adviser who knows
something about the business in which the taxpayer has invested.
Freytag v. Commissioner, 904 F.2d at 1017; Collins v. Commissioner,
857 F.2d 1383, 1386 (9th Cir. 1988), affg. Dister v. Commissioner,
T.C. Memo. 1987-217. Here Mr. Keeler has failed to make that
showing.
Similarly, Dr. Richartz and his corporation, Leema, are both
chargeable with knowledge of how Merit operated--not as a valid
economic enterprise, but rather as one formed and used to obtain
immediately large tax deductions and deferrals of highly
questionable validity. Neither Dr. Richartz nor any of Merit's
principals exhibited any concern about the obvious lack of economic
substance or about the absence of any meaningful profit motive in
selling and operating the Merit markets. The additions to tax under
section 6653(a) are properly imposed upon Dr. Richartz and Leema.
Ms. Rivera is also subject to the section 6653(a) additions to
tax. We have taken into account her circumstances, which included
a limited familiarity with English and her illness during at least
some of the period in issue. She apparently placed her trust in Dr.
Richartz. Ms. Rivera, however, was also a part-owner of Merit and
a participant in its activities. Having appraised the evidence and
her testimony, we believe that she was aware of its activities and
of its tax-benefit orientation. She filed tax returns which claimed
large, but economically unsubstantial, tax savings. It was not
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