Glenn A. Mortensen - Page 41

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               D.  Fairness Considerations                                            
               Petitioner’s final arguments concerning application of the             
          accuracy-related penalty are in essence arguments that imposition           
          of the penalty would be unfair or unjust in this case.                      
          Petitioner argues that “The application of penalties in the                 
          present case does not comport with the underlying purpose of                
          penalties.”  To this effect, petitioner argues that, in this                
          case:                                                                       
               the problem was not Petitioner’s disregard of the tax laws,            
               but was Jay Hoyt’s fraud and deception.  Petitioner did not            
               engage in noncompliant behavior, instead he was the victim             
               of a complex fraud that it took Respondent years to                    
               completely unravel.                                                    
               Petitioner made a good faith effort to comply with the tax             
               laws and punishing him by imposing penalties does not                  
               encourage voluntary compliance, but instead has the opposite           
               effect of the appearance of unfairness by punishing the                
               victim.  Indeed, penalties are improper for any investor in            
               the Hoyt partnerships on a policy basis alone.  [Fn. ref.              
               omitted.]                                                              
          We are mindful of the fact that petitioner was a victim of Mr.              
          Hoyt’s fraudulent actions.  Petitioner ultimately lost the bulk             
          of the tax savings that he received, which he had remitted to Mr.           
          Hoyt as part of his investment and which he never received back.            
          Nevertheless, petitioner believed that this money was being used            
          for his own personal benefit--at the time that he claimed the tax           
          savings, he believed that he would eventually benefit from them.            
          Petitioner also lost a substantial amount of out-of-pocket cash             
          which he paid to Mr. Hoyt in the years preceding and following              






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