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before investing in the Hoyt partnerships, but she chose not to
do so. Those promotional materials warned potential investors
that the promised tax savings may be disallowed by the IRS and
that potential investors should consult independent tax advisers
before making an investment in the partnership. Neither
petitioner nor Mr. Capehart conducted any independent
investigation, or hired a competent professional, to verify
critical factual representations made by the Hoyt organization.
Petitioner admitted that the large bills she and Mr. Capehart
received from the Hoyt organization “didn’t look right to * * *
[her]” and she felt that “somehow or another * * * [they were]
being taken advantage of.” Moreover, petitioner was aware of,
and questioned the large losses claimed on the tax returns she
reviewed and signed. Suspecting that the partnership deductions
were not legitimate, petitioner testified that, considering the
income they reported, the figures reported on their tax returns
from the Hoyt partnerships “scared the living daylight out of
* * * [her]”. Nevertheless, petitioner still signed the tax
returns claiming partnership losses and an investment tax credit
from SGE and IRA contribution deductions for contributions
allegedly made on behalf of her and Mr. Capehart. On these
facts, we conclude that petitioner has not shown that she had no
reason to know of the items giving rise to the deficiency.
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