Kenneth and Dorothy Hitchen - Page 23

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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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