- 28 -
Goldman v. Commissioner, 39 F.3d 402, 408 (2d Cir. 1994), affg.
T.C. Memo. 1993-480; Freytag v. Commissioner, supra.
A taxpayer’s reliance on representations by insiders,
promoters, or offering materials is not sufficient to establish
that a taxpayer reasonably relied on competent professional
advice. Neonatology Associates, P.A. v. Commissioner, supra;
Goldman v. Commissioner, supra at 408; LaVerne v. Commissioner,
94 T.C. 637, 652-653 (1990), affd. without published opinion 956
F.2d 274 (9th Cir. 1992), affd. in part without published opinion
sub nom. Cowles v. Commissioner, 949 F.2d 401 (10th Cir. 1991);
Berry v. Commissioner, T.C. Memo. 2001-311; Ferraro v.
Commissioner, T.C. Memo. 1999-324. Pleas of reliance have also
been rejected when the adviser knew nothing about the nontax
business aspects of the contemplated venture. See Freytag v.
Commissioner, supra at 888; Beck v. Commissioner, 85 T.C. 557,
572-573 (1985); Buck v. Commissioner, T.C. Memo. 1997-191.
Petitioner contends that he acted with due care and did not
fail to do what a reasonable or ordinarily prudent person would
do under the circumstances because: (1) His background was in
the fields necessary for him to have conducted a thorough
analysis of the scientific and economic merits of the investment,
and he conducted such an analysis; (2) he relied on his tax
return preparer, HG&C, and Boylan & Evans; and (3) he invested in
Madison primarily to earn a profit and only secondarily for its
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