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As a result of his Hoyt investment, on his 1991 Federal
income tax return petitioner claimed a $94,050 loss from Durham.
Petitioner had previously claimed losses from Durham of $81,440
and $175,560, respectively, on his 1989 and 1990 returns.
However, petitioner’s sole cash contribution to Durham was
$17,500. Considering the size of petitioner’s investment and the
disproportionately large losses generated by the partnership,
further investigation was warranted. See Todaro v. Commissioner,
T.C. Memo. 1995-398. As previously stated, petitioner made no
such investigation. The fact that petitioner was able to claim
in 1991 alone a loss that was five times his original investment
was enough to have put petitioner on “‘notice that the investment
was primarily for a tax purpose.’” Greene v. Commissioner,
supra. The amount of the losses petitioner claimed in 1991 and
prior years compared to the amount of his Hoyt investment created
a situation that was “too good to be true” within the meaning of
section 1.6662-3(b)(1)(ii), Income Tax Regs.
Finally, petitioner’s reliance on Bales v. Commissioner,
supra, is misplaced. Petitioner knew that the opinion generally
involved the taxable years 1977 through 1979. Petitioner also
knew that the Bales opinion did not deal with Durham, his
specific Hoyt partnership investment. While petitioner received
the opinion, there is no evidence that he personally relied upon
the opinion in taking the positions on his 1991 return. Instead,
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