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Reliance on representations by insiders or promoters, or on
offering materials has been held an inadequate defense to
negligence. Goldman v. Commissioner, supra; LaVerne v.
Commissioner, 94 T.C. 637, 652-653 (1990), affd. without
published opinion 956 F.2d 274 (9th Cir. 1992), affd. without
published opinion sub nom. Cowles v. Commissioner, 949 F.2d 401
(10th Cir. 1991). Advice from such individuals “is better
classified as sales promotion.” Vojticek v. Commissioner, T.C.
Memo. 1995-444. Pleas of reliance also have been rejected when
neither the taxpayer nor the advisers purportedly relied on by
the taxpayer knew anything about the nontax business aspects of
the contemplated venture. David v. Commissioner, supra; Freytag
v. Commissioner, supra.
Petitioner claims that he reviewed the offering memorandum
and its accompanying materials and discussed the partnership
investment with Freedman, Jacobson, and an associate in his law
firm. Petitioner’s purported reliance on these individuals and
on the materials in the offering memorandum, however, does not
relieve him of liability for the additions to tax for negligence.
The offering memorandum itself, especially the numerous
warnings and discussions of tax benefits and risk of audit,
should have alerted a prudent and reasonable investor to the
questionable nature of the promised deductions and credits. See
Collins v. Commissioner, 857 F.2d 1383, 1386 (9th Cir. 1988),
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