- 24 -
agreement, petitioner believed that his investment in San
Nicholas offered tax benefits, and his decision to invest was
influenced, in part, by that belief.
Third, we do not think that petitioner, a successful
businessman and, in petitioner’s counsel’s words, “a man who knew
about investments”, exercised due care at the time that he signed
the subscription agreement. In this regard we are again unable
to accept uncritically petitioner’s contention that he reasonably
relied on the offering memorandum. The short answer to this
contention is that petitioner either did not read the offering
memorandum in its entirety or chose to ignore portions thereof.
See Goldman v. Commissioner, 39 F.3d 402, 407-408 (2d Cir. 1994),
(holding that the taxpayer’s reliance on offering materials was
not reasonable), affg. T.C. Memo. 1993-480; see also Pasternak v.
Commissioner, 990 F.2d 893, 903 (6th Cir. 1993), affg. Donahue v.
Commissioner, T.C. Memo. 1991-181, holding that claims that are
probably “too good to be true” should be investigated by a
reasonably prudent person.21
20(...continued)
Commissioner, 99 T.C. 202, 212 (1992); Duralia v. Commissioner,
T.C. Memo. 1994-269; see also Tokarski v. Commissioner, 87 T.C.
74, 77 (1986).
21 The record includes a promotional videotape, produced by
U.S. Agri and featuring its president Mr. Pace, that described
jojoba as “liquid gold” and as “the industrial crop of the
future”, which would be cultivated in “some of the most hostile
land anywhere”. This videotape was provided to petitioner by Mr.
(continued...)
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