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invested, should have alerted petitioners to the need for further
investigation of the partnership transactions. Their reliance on
Clothier was misplaced because Clothier knew little about the
business aspects of Whitman, and there is no reason for us to
think he misled petitioners about the extent of his own knowledge
in this respect. Clothier relied on conclusory statements of
insiders as well as the conclusion of his client, an engineer,
who had no expertise in either taxes or the plastics recycling
industry and made only a casual inquiry about the transaction.
Neither Clothier nor petitioners undertook a good faith
investigation of the fair market value of the recyclers or the
underlying economic viability or financial structure of Whitman.
Accordingly, we hold that petitioners are liable for the
additions to tax for negligence under section 6653(a) for 1979
and section 6653(a)(1) and (2) for 1982 and 1984.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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