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[Rather,] I told [my clients] precisely what I had done to
investigate or analyze the transaction. I didn’t just say I did
due diligence, and leave it open for them to define what I might
or might not have done.”11
The purported value of the recyclers generated the
deductions and credits in this case, and that circumstance was
clearly reflected in the memorandum. Certainly Becker recognized
the nature of the tax benefits and, given his education and
experience, petitioner should have recognized it as well. Yet
neither petitioner nor Becker verified the purported value of the
recyclers. Becker confirmed in his testimony incorporated in
this record by stipulation that he relied on PI for the value of
the recyclers. Investors as sophisticated as petitioner either
learned or should have learned the source and shortcomings of
Becker’s valuation information when he reported to them and
“precisely” disclosed “what [he] had done to investigate or
analyze the transaction.” Accordingly, we hold that petitioners
did not in good faith or reasonably rely on Becker as an expert
or qualified professional working in the area of his expertise to
11 We note that petitioner testified: “I remember we talked
about the valuations that were obtained and I remember him
telling me in words or in substance that I could rely on those
valuations.” We consider petitioner’s testimony inconsistent
with Becker’s testimony, and as to this matter we consider
Becker’s testimony reliable and petitioner’s alleged recollection
unreliable. See supra note 10 to the effect that this problem
was known to petitioner and his counsel, who chose not to call
upon Becker for clarifying testimony.
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