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Similarly, petitioners here acted on their enthusiasm for the
potential uses of jojoba and for the tax benefits offered by the
investment. The evidence suggests that the nature of the advice
given by Mr. Matsuda was highly generalized and based primarily
on a mere cursory review of the offering rather than on
independent knowledge, research, or analysis. Petitioners failed
to show that Mr. Matsuda had the expertise and knowledge of the
pertinent facts to provide informed advice on the investment in
Jojoba Hawaii. See Freytag v. Commissioner, 89 T.C. at 888.
Accordingly, petitioners failed to establish that their reliance
on the advice of Mr. Matsuda was reasonable or in good faith.
See Glassley v. Commissioner, supra.
Mr. Matsuda had no background or expertise in the areas of
agriculture or jojoba plants. More importantly, because Mr.
Matsuda had a personal profit motive in selling this investment
to clients, of which petitioners were aware, he had a conflict of
interest in advising petitioners to purchase the limited
partnership interests. The advice petitioners purportedly
received from Mr. Matsuda 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.
524, 565 (1988). Petitioners' reliance on the advice of Mr.
Matsuda was unreasonable under the circumstances.
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