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purported reliance on the materials in the memorandum, as well as
their advisers, does not relieve them of liability for the
additions to tax for negligence. Petitioners argue that they are
different from the numerous other investors who have negligently
speculated on the Plastics Recycling deal because they or their
friends had a special relationship with Miller or Becker. As
explained below, we consider this argument to be contrary to the
facts of this case and wholly unpersuasive.
A. The Memorandum and Petitioners’ Colleagues
1. The Memorandum
Petitioner contends that before purchasing shares in SAB
Foam he read the memorandum and its accompanying materials. The
purported value of the recyclers is what generated the deductions
and credits. The memorandum clearly reflects this circumstance.
The recyclers, which in fact have a value of no more than $50,000
each, were reported by SAB Foam to have a basis of $1,750,000
each. As a result of the purported value of the recyclers,
petitioners’ investment of $12,500 produced for them on their
1982 tax return claimed tax credits of $20,021 and deductions of
$9,646. The direct benefits claimed on petitioners’ tax return,
from the tax credits alone, far exceeded their cash investment.
Like the taxpayers in Provizer v. Commissioner, T.C. Memo. 1992-
177, “except for a few weeks at the beginning, petitioners never
had any money in the deal.” Under these circumstances, a
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