- 27 -
indicated by reliance on facts that, unknown to the taxpayer, are
incorrect.” Id.
Petitioner argues that he had reasonable cause for his
underpayments of tax because he was defrauded by Hoyt and
therefore made an “honest mistake of fact”. He asserts that he
had insufficient information concerning his investment, and that
all “available independent evidence * * * supported Hoyt’s
assertions.” However, petitioner testified that he relied
exclusively on the assertions made by Hoyt, members of the Hoyt
organization, and other Hoyt investors. There is no indication
that petitioner attempted to verify any of the information he was
given. He did not seek an outside opinion from an investment
advisor, tax attorney, or accountant. Petitioner’s argument that
he had insufficient information, while at the same time admitting
he made no attempt to get additional information, is not
persuasive. If petitioner misunderstood the facts surrounding
his investment, it was not an honest misunderstanding but a
negligent one.
c. Reliance on the Bales Opinion
Petitioner argues he had reasonable cause for his
underpayments of tax because he relied on this Court’s opinion in
Bales v. Commissioner, T.C. Memo. 1989-568.9 Bales involved
9 Petitioner also argues that the opinion in Bales v.
Commissioner, T.C. Memo. 1989-568, provided substantial authority
(continued...)
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