- 20 -
Petitioner testified that his accountant told him there were tax
advantages in this arrangement with respect to investment
credits. The arrangement certainly is not unique, but it is tax-
efficient and sophisticated. As petitioner himself admitted: “I
do have a business sense of making a business operate” and “I
know what it takes to get the product out the door to get income
out of it.” Petitioner’s own testimony that he cofounded, built
up, and now owns 98 percent of the highly successful Apex
business is inconsistent with his argument that he lacks business
capabilities.
In short, petitioner was not lacking in investment
experience or sophistication. Petitioner’s active role in
seeking investments as well as founding, building, and operating
a successful corporate enterprise and all the knowledge and
experience associated with such a successful business career
support the conclusion that he was capable of properly
investigating and analyzing the Whitman tax shelter and that his
failure to do so was negligent.
2. Petitioners’ Reliance on Their C.P.A.
Petitioners claim that their reliance on Clothier’s advice
was reasonable. Under some circumstances a taxpayer may avoid
liability for negligence if reasonable reliance on a competent
professional adviser is shown. See United States v. Boyle, 469
U.S. 241, 250-251 (1985); Freytag v. Commissioner, 89 T.C. 849,
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011