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money was being used for their own personal benefit--at the time
that they claimed the tax savings, they believed that they would
eventually benefit from them. Petitioners also lost a
substantial amount of out-of-pocket cash which they paid to Mr.
Hoyt in the years preceding and following the year in issue. In
fact, some of the later payments were made in response to not-so-
thinly-veiled threats by Mr. Hoyt of retaliatory action if
petitioners failed to remit the payments. However, this does not
alter our conclusion that petitioners were negligent with respect
to entering the Hoyt investment, and that they were negligent
with respect to the positions that they took on their 1991 tax
return. Despite Mr. Hoyt’s actions, the positions taken on the
1991 return signed by petitioners were ultimately the positions
of petitioners, not of Mr. Hoyt.
V. Conclusion
Upon the basis of the record before the Court, we conclude
that petitioners’ actions in relation to the Hoyt investment
constituted a lack of due care and a failure to do what
reasonable or ordinarily prudent persons would do under the
circumstances. First, petitioners entered into an investment,
allegedly involving at least $175,000 of personal debt, without
investigating its legitimacy. Second, and foremost, petitioners
trusted individuals who told them that they effectively could
escape paying Federal income taxes for a number of years--
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