Carl L. and Eugenia T. Henn - Page 14




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          opinion Osterhout v. Commissioner, T.C. Memo. 1993-251.  In that            
          case, the court found that it was reasonable for the taxpayers to           
          have relied upon a tax opinion contained in a placement                     
          memorandum, stating:  “Absent some evidence that would tell a               
          prospective investor that the opinion of a reputable CPA or law             
          firm should be suspect, we find such reliance to be reasonable              
          under the circumstances.”  Id.  Because petitioners’ purported              
          reliance does not even rest upon an expressed opinion concerning            
          a critical issue, Balboa Energy Fund 1981 is inapposite to the              
          present case.  Furthermore, considering petitioner’s extensive              
          experience and the numerous statements found in the private                 
          placement memorandum advising petitioners to consult outside                
          counsel, any reliance by petitioners on the opinion letter would            
          nevertheless have been unreasonable under the circumstances of              
          this case.                                                                  
               We sustain respondent’s determination that petitioners are             
          liable for the section 6653(a)(1) and (2) additions to tax for              
          negligence.                                                                 
          Substantial Understatement                                                  
               As a preliminary matter, petitioners argue that respondent’s           
          assertion of the substantial understatement addition to tax is              
          not timely.  However, the parties agree--and the record supports            
          the finding--that the notice of deficiency was issued prior to              
          the running of the applicable period of limitations.  See sec.              






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