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did what a reasonably prudent person would have done under the
circumstances. Bixby v. Commissioner, 58 T.C. 757, 791 (1972).
III. Application of the Negligence Standard
Although petitioners had no background in cattle ranching,
and petitioners did not consult any independent investment
advisers, petitioners made the decision to invest in a cattle
ranching activity as a means to provide for their retirement. As
part of their initial investment in the Hoyt partnerships,
petitioners provided Mr. Hoyt with the authority to sign
promissory notes on their behalf. The power of attorney forms
which petitioners signed granted Mr. Hoyt the authority to incur
personal debts on petitioners’ behalf, debt that Mr. Van Scoten
believed petitioners would be required to repay in the event
something went wrong with the partnership. In addition to the
promissory notes, the power of attorney forms granted Mr. Hoyt
the power to control numerous aspects of petitioners’ investment
without prior consultation with petitioners. Nevertheless,
petitioners placed their trust entirely with the Hoyt
organization, and they did not investigate the legitimacy of the
partnerships with anyone not employed by or invested in the Hoyt
organization. We conclude that petitioners were negligent in
signing the power of attorney forms and in entering into the
investment. Furthermore, we note that we do not accept Mr. Van
Scoten’s testimony that he did not intend to invest in a tax
shelter, and that he “never intended not to pay” his taxes. The
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