- 40 -
view of petitioner’s sophistication, experience, and education,
it was not reasonable for petitioners to rely as they did on an
interconnected group of advisers, promoters, and insiders, none
of whom had any expertise in plastics recycling. Petitioner
should have been able to determine that the recyclers were not
unique, that they were not worth the amount ascribed to them, and
that SAB Foam lacked economic substance and had no potential for
profit. None of the so-called advisers undertook a good faith
investigation of the fair market value of the recyclers or of the
underlying economic viability or financial structure of SAB Foam.
Further, most of petitioners’ professional advisers had a
financial interest in either SAB Foam or another similar
partnership. The Plastics Recycling transaction was a sham, and,
as a sophisticated attorney, petitioner should have been able to
figure this out if he really had tried. Upon consideration of
the entire record, respondent’s determinations that petitioners
are subject to negligence penalties under section 6653(a)(1) and
(2), with respect to their tax return for 1982, are sustained.
Issue 2. Piggyback Agreement
Petitioners argue that they are entitled to the benefits of
the Stipulation of Settlement for Tax Shelter Adjustments
(piggyback agreement) applicable to Plastics Recycling cases.
Petitioners claim they are in essentially the same position as
the taxpayers in Fisher v. Commissioner, T.C. Memo. 1994-434, and
Page: Previous 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 NextLast modified: May 25, 2011