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Petitioners argue that they were not negligent under the
standard set forth by the Fifth Circuit Court of Appeals in
Heasley v. Commissioner, 902 F.2d 380 (5th Cir. 1990), revg. T.C.
Memo. 1988-408. In Heasley, the court found that the taxpayers--
who were moderate-income, blue-collar investors with little prior
investment experience--were to be held to a lower standard of due
care when evaluating whether they were negligent in making an
investment. Petitioners do not merit such a lower standard. On
the contrary, petitioner’s excellent business education and
extensive financial experience requires a higher standard. See
Henry Schwartz Corp. v. Commissioner, 60 T.C. 728, 740 (1973);
Harvey v. Commissioner, T.C. Memo. 2001-16. Consequently,
Heasley is not applicable to the case at hand.3
Petitioners cite several cases4 for the proposition that
taxpayers cannot be negligent where the relevant legal issue was
“unsettled” or “reasonably debatable”. Petitioners, however, did
not receive substantive advice concerning the deduction from
anyone independent of the investment, nor did they conduct their
own investigation into the propriety of the deduction. Indeed,
3Likewise inapplicable is this Court’s opinion in Dyckman v.
Commissioner, T.C. Memo. 1999-79, to which petitioners cite,
regarding the standard to be applied for taxpayers with a
“complete lack of sophistication in investment matters.”
4Everson v. United States, 108 F.3d 234 (9th Cir. 1997);
Foster v. Commissioner, 756 F.2d 1430 (9th Cir. 1985), affg. in
part and vacating in part 80 T.C. 34 (1983); Hummer v.
Commissioner, T.C. Memo. 1988-528.
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