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should have questioned whether the prices were in fact negotiated
at arm’s length. Under these circumstances, petitioners’ claim
that they reasonably and in good faith relied on the tax opinion
is unconvincing. A sophisticated, experienced, and intelligent
lawyer like petitioner would know, or at least should know,
better than to rely blindly upon a document with the warnings and
defects of the memorandum.
Petitioners’ contention that they reasonably relied on the
expert opinions of Ulanoff and Burstein is unjustified. Neither
Ulanoff nor Burstein was an expert in plastics or plastics
recycling, and both relied on information provided by PI and
other parties related to the transaction in providing their
reports. In addition, Ulanoff and Burstein each owned an
interest in at least one partnership that owned recyclers as part
of the Plastics Recycling program. See, e.g., Jaroff v.
Commissioner, T.C. Memo. 1996-527. Petitioners did not
independently obtain these individuals’ advice but rather
received their reports as part of the promotional material
received from SAB Foam. Reliance on the memorandum, and the
reports therein, is simply an inadequate defense for petitioners.
Given the well-disclosed fact that the investment and energy tax
credits generated by SAB Foam depended on the fair market value
of the recyclers, petitioner should have made inquiries about the
value of the recyclers rather than merely relying on the
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