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reasonable or ordinarily prudent persons would do under the
circumstances. First, petitioners entered into an investment,
allegedly involving $190,000 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--
petitioners reported a tax liability of $1,191 on $250,753 of
income over a 5-year period, based upon advice from Mr. Hoyt’s
organization--and that they could do so utilizing losses and
credits with respect to which petitioners understood neither the
source nor the legal rationale. We similarly conclude that
petitioners did not have reasonable cause for any of the
underpayments resulting from the tax claims related to their
investment. These conclusions are reinforced by the fact that
petitioners received a warning from respondent within months of
requesting their first refund based upon the Hoyt investment, a
warning that petitioners ignored. Furthermore, petitioners’
reliance on Mr. Hoyt and those in his organization--the promoters
of the investment and the persons receiving the bulk of the
monetary benefits of the tax claims--was objectively
unreasonable. As such, it cannot be a defense to the negligence
additions to tax.
Finally, we are also mindful of the fact that petitioners
ultimately lost the bulk of the tax refunds that they received,
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