- 15 -
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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