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or analysis. Petitioners failed to show that Mr. Hulse had the
expertise and knowledge of the pertinent facts to provide
informed advice on the investment in Blythe II. See Freytag v.
Commissioner, 89 T.C. at 888. Accordingly, petitioners failed to
establish that their reliance on the advice of Mr. Hulse was
reasonable or in good faith. See Glassley v. Commissioner,
supra.
The Court next examines petitioners' reliance on the advice
of Mr. Sheets. Mr. Sheets had no background or expertise in the
areas of agriculture or jojoba plants. In fact, it appears that
nearly all of the previous investments recommended to petitioners
by Mr. Sheets had been real estate investments, and Blythe II was
the first investment of an agricultural nature advocated by him.
More importantly, because Mr. Sheets had a personal profit motive
in selling this investment to clients, he had a conflict of
interest in advising petitioners to purchase the limited
partnership interests.10 The advice petitioners allegedly
received from Mr. Sheets fails as a defense to negligence due to
his lack of competence to give such advice and the clear presence
of a conflict of interest. See Rybak v. Commissioner, 91 T.C.
10 Petitioner acknowledged in his testimony that he knew
Mr. Sheets was receiving commissions for finding investors to
purchase the limited partnership interests.
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