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losses purportedly reduced petitioners’ tax liability to a
combined total of $103 for 1988 and 1989.
In summary, the tax returns and the Form 1045 filed by
petitioners during the years in issue resulted in a claimed total
tax liability of $1,191. Mr. Hitchen earned wages during those
years totaling $250,753. Petitioners admit that they did not
know the reasoning behind the tax benefits touted by the Hoyt
organization that led to this nearly complete elimination of
Federal tax liability. Yet petitioners did nothing to inquire
into the legitimacy of the tax claims other than to assume the
returns prepared by the Hoyt organization were correct.
Furthermore, most of the “too good to be true” tax benefits were
claimed by petitioners within months of receiving the warning
letter from respondent, and immediately after the Hoyt
organization switched petitioners to a new partnership and
advised petitioners to begin reporting losses as having been
derived from farming activities rather than from partnerships--
efforts that were apparently designed to avoid detection by the
IRS. Petitioners chose to follow Mr. Hoyt’s advice, however, and
they ignored any communications from the IRS.
While we are mindful of the fact that petitioners were
unsophisticated in both investment and tax matters, we conclude
that petitioners’ actions in relation to the Hoyt investment
constituted a lack of due care and a failure to do what
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