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conclude, therefore, that petitioner has not shown that she had
no reason to know of the items giving rise to the deficiency.
Even assuming we were to conclude that a reasonably prudent
person in petitioner’s position at the time she signed the
returns for the years at issue could not be expected to know the
facts leading to the disallowance of the Hoyt partnership
deductions and the IRA contribution deduction, we would still
conclude that petitioner failed to satisfy her duty of inquiry.
Petitioner and Mr. Abelein did not make any effort to verify the
most important and most basic facts essential for the viability
of the Hoyt partnership investments and their tax consequences.
For example, they conducted no investigation of whether the Hoyt
partnerships in which they were investing actually owned cattle
in sufficient numbers and with sufficient value to support the
projected loss deductions. They did not ask a knowledgeable tax
professional to investigate or verify that they would have
sufficient basis in their Hoyt partnership investments to claim
their distributive shares of partnership tax deductions.15 They
allowed the promoter of the Hoyt partnerships to prepare their
personal income tax returns, and they apparently never requested
or obtained verification that the IRA contribution claimed on
15While Mr. Abelein testified he contacted an accountant and
an IRS agent about the legality of the Hoyt partnerships, he
admitted that he only discussed the partnerships in general terms
and that the IRS agent would not discuss the actual Hoyt
organization with him at all.
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