Eugene A. Sanders - Page 15

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          the record reflects that petitioner relied on the representations           
          of the Hoyt organization with respect to his Hoyt investment and            
          the preparation of his 1991 return.12                                       
               The Bales case involved different investors, different                 
          partnerships, different taxable years, and different issues from            
          those underlying the present case.  Additionally, this Court has            
          noted that by the 1980s the Hoyt organization’s cattle-                     
          management and record-keeping practices changed dramatically.               
          See Durham Farms #1, J.V. v. Commissioner, T.C. Memo. 2000-159,             
          affd. 59 Fed. Appx. 952 (9th Cir. 2003).                                    

               12  While petitioner refers to the fraud and deceit of Mr.             
          Hoyt with respect to his Hoyt partnership investment, he does not           
          specifically argue that Mr. Hoyt’s fraud is a reasonable cause              
          for his tax return positions.  Nevertheless, we note that good              
          faith reliance on professional advice concerning tax laws may be            
          a defense to the negligence penalty.  United States v. Boyle, 469           
          U.S. 241, 250-251 (1985).  However, it is also well established             
          that taxpayers generally cannot “reasonably rely” on the                    
          professional advice of a tax shelter promoter.   See Goldman v.             
          Commissioner, 39 F.3d 402, 408 (2d Cir. 1994), affg. T.C. Memo.             
          1993-480; Neonatology Associates, P.A. v. Commissioner, 115 T.C.            
          43, 98 (2000) (“Reliance may be unreasonable when it is placed              
          upon insiders, promoters, or their offering materials, or when              
          the person relied upon has an inherent conflict of interest that            
          the taxpayer knew or should have known about.”), affd. 299 F.3d             
          221 (3d Cir. 2002); Marine v. Commissioner, 92 T.C. 958, 992-993            
          (1989), affd. without published opinion 921 F.2d 280 (9th Cir.              
          1991).  Such reliance is especially unreasonable when the advice            
          would seem to a reasonable person to be “‘too good to be true’”.            
          Pasternak v. Commissioner, 990 F.2d 893, 903 (6th Cir. 1993),               
          affg. Donahue v. Commissioner, T.C. Memo. 1991-181; Elliott v.              
          Commissioner, 90 T.C. 960, 974 (1988), affd. without published              
          opinion 899 F.2d 18 (9th Cir. 1990).  Nevertheless, we note that            
          for the reasons discussed above, including petitioner’s failure             
          to make any independent inquiry or investigation into the Hoyt              
          partnerships, any reliance by petitioner on the Hoyt organization           
          or its representatives was objectively unreasonable.                        

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