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whom were also investing in Clearwater or related plastics
partnerships. We have not been convinced that these were any
more than half-hearted inquiries, or that any of these other
individuals were qualified to opine on the profitability of the
transaction. See id.
Petitioners also assert that because of petitioner’s
background, it was reasonable for them to rely simply on the
Clearwater offering memorandum, including the reports of
Burstein, Ulanoff, and the tax opinion prepared by WMDI.
Petitioners claim that petitioner was sufficiently knowledgeable
to decipher those reports and to find their conclusions
reasonable. Petitioners contend that after reading those
reports, petitioner concluded that the reports were accurate, and
that there was nothing more an independent expert, or independent
research, could tell petitioners that was not already in these
reports.
We think it unreasonable for an educated and sophisticated
investor, such as petitioner, to conclude that an independent
expert cannot evaluate a deal more objectively than the
individuals retained by insiders to draft the offering memorandum
and the tax opinions contained therein. “It is unreasonable for
taxpayers to rely on the advice of someone who they should know
has a conflict of interest.” Id. at 59; see Goldman v.
Commissioner, 39 F.3d at 408; LaVerne v. Commissioner, 94 T.C.
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