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“the transaction in issue should be respected for Federal income
tax purposes.” Petitioner’s reliance on Bales is misplaced. The
case was decided in 1989, years after petitioner invested in RCR
#1. Thus, petitioner cannot claim that she relied on the case in
evaluating the propriety of the deduction and credits that she
claimed on her return. Petitioner, however, also argues that,
because the Court was unable to uncover fraud or deception by Mr.
Hoyt in Bales, petitioner as an individual taxpayer was in no
position to evaluate the legitimacy of RCR #1 or the tax benefits
claimed with respect thereto. This argument employs the Bales
case as a red herring: The Bales case involved different
investors, different partnerships, different taxable years, and
different issues. Furthermore, adopting petitioner’s position
would imply that taxpayers should have been given carte blanche
to invest in partnerships promoted by Mr. Hoyt, merely because
Mr. Hoyt had previously engaged in activities which withstood one
type of challenge by the Commissioner, no matter how illegitimate
the partnerships had become or how unreasonable the taxpayers
were in making investments therein and claiming the tax benefits
that Mr. Hoyt promised would ensue.
In summary, petitioner invested in RCR #1, and petitioner
subsequently signed the tax return and tentative refund request
form that, in combination, claimed to reduce petitioner’s tax
liability over a 4-year period to $1,172, resulting in a combined
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