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and ordinarily prudent person would exercise under the
circumstances. See Neely v. Commissioner, 85 T.C. 934, 947
(1985). The pertinent question is whether a particular
taxpayer's actions are reasonable in light of the taxpayer's
experience, the nature of the investment, and the taxpayer's
actions in connection with the transactions. See Henry Schwartz
Corp. v. Commissioner, 60 T.C. 728, 740 (1973). In this regard,
the determination of negligence is highly factual. “When
considering the negligence addition, we evaluate the particular
facts of each case, judging the relative sophistication of the
taxpayers as well as the manner in which the taxpayers approached
their investment." Turner v. Commissioner, T.C. Memo. 1995-363.
Petitioners claimed operating losses and investment and
energy tax credits relying almost exclusively on representations
in the Clearwater offering memorandum. Petitioners did not hire
an independent industry expert to evaluate the profitability of
their investment, nor did they employ an accountant to verify the
correctness of the position on their tax return.
Petitioners contend that because of petitioner’s background
in chemical engineering and patent law, he possessed sufficient
expertise to evaluate the Clearwater transaction, making it
unnecessary to hire an expert to do the same. Petitioners claim
that petitioner drew on his background to conclude that the EPE
recyclers were unique (based on the purportedly unique blade
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