Eugene A. Sanders - Page 14

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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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