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proving that respondent’s determination is erroneous and that he
did what a reasonably prudent person would have done under the
circumstances. See Rule 142(a); Hansen v. Commissioner, supra;
Hall v. Commissioner, 729 F.2d 632, 635 (9th Cir. 1984), affg.
T.C. Memo. 1982-337; Bixby v. Commissioner, 58 T.C. 757, 791
(1972).
III. Application of the Negligence Standard
Although petitioners had no experience in farming or
ranching, and petitioners did not consult any independent
investment advisers, petitioners made the decision to invest in a
cattle ranching activity as a means to provide for their
retirement. As part of their initial investment in the Hoyt
partnerships, petitioners provided Mr. Hoyt with the authority to
sign promissory notes on their behalf in an amount of at least
$175,000. Ms. Hansen, and presumably Mr. Hansen, believed that
petitioners would be personally liable on these promissory notes
in the event that a problem arose causing there to be
insufficient value in the cattle to cover the amount of the
notes. Nevertheless, petitioners placed their trust entirely
with the promoters of the investment, and they did not
investigate either the legitimacy of the partnerships or the
implications of the promissory notes. We conclude that
petitioners were negligent in signing the promissory notes and in
entering into the investment.
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