- 23 -
“investment”, and now realize that paying their taxes will
require a change of lifestyle.13
We also agree with a claim by respondent that compromising
petitioners’ case on grounds of public policy or equity would not
promote effective tax administration. While petitioners portray
themselves as victims of Hoyt’s alleged fraud and respondent’s
alleged delay in dealing with Hoyt, they take no responsibility
for their tax predicament. We cannot agree that acceptance by
respondent of petitioners’ $32,000 offer to satisfy their
approximately $400,000 tax liability would enhance voluntary
compliance by other taxpayers. A compromise on that basis would
place the Government in the unenviable role of an insurer against
poor business decisions by taxpayers, reducing the incentive for
taxpayers to investigate thoroughly the consequences of
transactions into which they enter. It would be particularly
inappropriate for the Government to play that role here, where
the transaction at issue is participation in a tax shelter.
13 Of course, the examples in the regulations are not meant
to be exhaustive, and petitioners have a more sympathetic case
than the taxpayers in Fargo v. Commissioner, supra at 714, for
whom the Court of Appeals for the Ninth Circuit noted that “no
evidence was presented to suggest that Taxpayers were the subject
of fraud or deception”. Such considerations, however, have not
kept this Court from finding investors in Hoyt’s shelters to be
culpable of negligence, most recently in Keller v. Commissioner,
T.C. Memo. 2006-131, nor prevented the Courts of Appeals for the
Sixth and Tenth Circuits from affirming our decisions to that
effect in Mortensen v. Commissioner, 440 F.3d 375 (6th Cir.
2006), affg. T.C. Memo. 2004-279, and Van Scoten v. Commissioner,
439 F.3d 1243 (10th Cir. 2006), affg. T.C. Memo. 2004-275.
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