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408; David v. Commissioner, 43 F.3d 788, 789-790 (2d Cir. 1995),
affg. T.C. Memo. 1993-621; Freytag v. Commissioner, supra; Sann
v. Commissioner, T.C. Memo. 1997-259.
Moreover, reliance on representations by insiders or
promoters, or on offering materials has been held an inadequate
defense to negligence. See Pasternak v. Commissioner, 990 F.2d
893 (6th Cir. 1993), affg. Donahue v. Commissioner, T.C. Memo.
1991-181; LaVerne v. Commissioner, 94 T.C. 637, 652-653 (1990),
affd. without published opinion 956 F.2d 274 (9th Cir. 1992);
Sann v. Commissioner, supra. Pleas of reliance have been
rejected when neither the taxpayer nor the advisers purportedly
relied upon by the taxpayer knew anything about the nontax
business aspects of the contemplated venture. See David v.
Commissioner, supra; Freytag v. Commissioner, supra.
In these cases, petitioners’ purported reliance on Grande
and Maki does not relieve them of liability for the additions to
tax for negligence. Grande’s and Maki’s expertise was in
taxation, not plastics or plastics recycling. Moreover, neither
Grande nor Maki consulted with any persons who had such expertise
in plastics or plastics recycling. At trial, Keith and Warren
testified that Grande’s and Maki’s review was limited to
examining the offering memorandum to ascertain whether the
documents had been properly prepared so that they as limited
partners would be entitled to the tax benefits presented by the
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