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partnership, petitioner responded: “Well, I thought there might
be a residual value, but obviously the tax credits were the main
feature”. He explained that the residual value he referred to
was the remaining value of the recyclers at the end of the
partnership’s lease. Yet the tax opinion letter stated that
“the Partnership does not have an option to purchase the
Sentinel Recyclers even at fair market value, and any residual
value of the Sentinel Recyclers will inure solely to the benefit
of F&G.” Thus, the partnership had nothing to gain from the
residual value of the recyclers at the end of its lease.
Upon consideration of the entire record, we hold that
petitioner did not exercise due care in claiming substantial tax
credits and partnership losses. It was not reasonable for
petitioner to rely on the offering memorandum, the expert
opinions contained therein, promoters, insiders to the
transaction, or his law firm associate. Accordingly, petitioner
is liable for the negligence additions to tax under section
6653(a)(1) and (2).
To reflect the foregoing,
Decision will be entered
for respondent.
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