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petitioners never had any money in the * * * [partnership
transaction].” Under these circumstances, a reasonably prudent
person would have asked a qualified adviser if such a windfall
were not too good to be true. See McCrary v. Commissioner, 92
T.C. 827, 850 (1989).
Schluter understood that such a windfall was too good to be
true. Although, Schluter had no expertise with plastics
recycling, Schluter knew that the recyclers’ actual value was a
potential issue that was likely to be raised by the IRS. Despite
his concerns, Schluter failed to consult an independent appraiser
or anyone with expertise in plastics or plastics recycling. If
Schluter had made a reasonable effort to determine the fair
market value of the recyclers, he would have determined that the
recyclers’ price was grossly inflated. At that point a
reasonable person would have inquired why the partnership would
be willing to “invest” in machines at far in excess of their fair
market value when it could purchase other much less expensive
machines that performed virtually the same functions. In any
event, Schluter testified that his clients had been audited only
rarely and that in his view, even if petitioners were audited,
IRS only would adjust the recyclers’ value and therefore would
reduce petitioners’ deductions and tax credits.
Schluter also contends that he discussed the recyclers’
value with an unidentified C.P.A. from Oklahoma and with Mejia.
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