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testified that he probably referred to Hamilton as a tax shelter.
Warren also testified that he knew that Masters was a tax
shelter.
Petitioners’ reliance on Krause v. Commissioner, 99 T.C. 132
(1992), affd. sub nom. Hildebrand v. Commissioner, 28 F.3d 1024
(10th Cir. 1994), is misplaced. The facts in Krause are
distinguishable from the facts in these cases. In Krause, the
taxpayers invested in limited partnerships whose investment
objectives concerned enhanced oil recovery (EOR) technology. The
Krause opinion states that during the late 1970’s and early
1980’s, the Federal Government adopted specific programs to aid
research and development of EOR technology. See id. at 135-136.
In holding that the taxpayers in Krause were not liable for the
negligence addition to tax, this Court noted that one of the
Government’s expert witnesses acknowledged that “investors may
have been significantly and reasonably influenced by the energy
price hysteria that existed in the late 1970s and early 1980s to
invest in EOR technology.” Id. at 177. While EOR was, according
to our opinion in Krause, at the forefront of national policy and
the media during the late 1970’s and early 1980’s, petitioners
have failed to demonstrate that the so-called energy crisis
provided a reasonable basis for them to invest in Masters.
In addition, the taxpayers in Krause were either experienced
in or investigated the oil industry and EOR specifically. One of
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