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manner objectively reasonable. Mr. Hoyt was the primary creator
and promoter of the RCR #1 partnership, and Mr. Hoyt was
receiving petitioner’s tax refund checks from the Government,
cashing them, and retaining the bulk of the proceeds. For
petitioner to trust Mr. Hoyt for tax advice and/or to prepare her
returns under these circumstances was inherently unreasonable.
Finally, petitioner argues that she was defrauded by Mr.
Hoyt, and that any amount of investigation on her part would have
failed to undercover his criminal activities with respect to the
investor partnerships. This argument is mere speculation by
petitioner, however, because petitioner never investigated the
partnerships. While Mr. Hoyt may have misled petitioner
concerning the investment, petitioner nevertheless was negligent
in not investigating the promoter’s claims or otherwise inquiring
into the nature of the tax benefits that she claimed on her
return, benefits which on their face reduced petitioner’s tax
liability to nearly zero over a span of four years--all without
any prior cash investment by petitioner or Mr. Barnes.
Petitioner asserts that a prior case decided by this Court,
Bales v. Commissioner, T.C. Memo. 1989-568, is relevant in the
inquiry into whether petitioner was negligent. Bales involved
deficiencies asserted against various investors in several
different cattle partnerships marketed by Mr. Hoyt. This Court
found in favor of the investors on several issues, stating that
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