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under new ownership in a new location, and there is no reason to
believe Lewin had any great knowledge about the company or its
business in 1982.
D. Miscellaneous
We dismiss petitioner’s contention that his allegedly
successful 1981 investment in SAB Resource evidenced the
reasonableness of the 1982 investment in SAB Foam. Petitioners
received a royalty payment within 3 months of their investment in
addition to the credits and deductions. Petitioners argue that
this makes the case different from other similar cases and makes
their subsequent investment in SAB Foam reasonable. The modest
royalty was not sufficient to change the character of the deal.
Petitioners’ assertion that the amount invested was
“relatively small” is irrelevant when considering the amount of
tax benefits quickly claimed. The tax benefits and risks of the
transaction were substantial, and they were set forth in the
memorandum for anyone to see. Undoubtedly investors as
sophisticated as petitioner and his partners knew the size of the
potential benefits and risks here or should have known them if
they had been properly careful.
E. Conclusion as to Negligence
Under the circumstances of this case, petitioners failed to
exercise due care in claiming large deductions and tax credits
with respect to SAB Foam on their Federal income tax return. In
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