- 21 -
888 (1987), affd. 904 F.2d 1011 (5th Cir. 1990), affd. on other
grounds 501 U.S. 868 (1991). However, reliance on professional
advice, standing alone, is not an absolute defense to negligence,
but rather a factor to be considered. Freytag v. Commissioner,
supra. For reliance on professional advice to excuse a taxpayer
from negligence, the taxpayer must show that the professional had
the expertise and knowledge of the pertinent facts to provide
informed advice on the subject matter. See Chakales v.
Commissioner, 79 F.3d 726, 730 (8th Cir. 1996), affg. T.C. Memo.
1994-408; 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,
promoters, or offering materials has been held an inadequate
defense to negligence. See Pasternak v. Commissioner, 990 F.2d
893, 903 (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), affd. in part without published opinion sub nom. Cowles v.
Commissioner, 949 F.2d 401 (10th Cir. 1991); 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
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