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Commissioner, 857 F.2d 1383, 1386 (9th Cir. 1988), affg. Dister
v. Commissioner, T.C. Memo. 1987-217. In such cases, taxpayers
have a duty to show that they made reasonable inquiry into the
validity of the investment plans that generated such deductions.
See Zmuda v. Commissioner, 731 F.2d 1417, 1422, 1423 (9th Cir.
1984), affg. 79 T.C. 714 (1982).
Petitioners have not made such a showing. Their reliance
upon the advice of Mr. Schenkman did not constitute a "reasonable
inquiry". An accountant's advice cannot shield taxpayers from
liability for the negligence penalties when the accountant lacks
knowledge of pertinent facts relating to the venture as to which
the taxpayers are seeking advice. See Collins v. Commissioner,
supra. Petitioners have not demonstrated that Mr. Schenkman
possessed sufficient expertise to advise them about the gold
trading or financial instruments involved in the FTI/Merit
programs. To the contrary, Mr. Schenkman has conceded that he
was not a specialist in gold trading or financial instruments.
He has stated that he merely "tried to lay out what the tax
consequences would be based on the information given to me by the
promoter". Mr. Lincir had substantial exposure to the practices
of precious metal trading. He knew, or should have known, of Mr.
Schenkman's relative lack of experience.
Moreover, it was not reasonable for petitioners to base
substantial tax losses solely upon the advice of a tax adviser
who has an economic interest in promoting the investment.
Investors instead have a duty to consult with competent advisers
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