- 24 - case, respondent’s reliance on that example was not arbitrary or capricious. 3. Petitioner’s Other “Equitable Facts” Petitioner argues that respondent abused his discretion by failing to consider the other “equitable facts” of this case. Petitioner’s “equitable facts” include reference to: (1) Petitioner’s reliance on Bales v. Commissioner, T.C. Memo. 1989- 568;15 (2) petitioner’s reliance on Hoyt’s enrolled agent status; (3) Hoyt’s criminal conviction; (4) Hoyt’s fraud on petitioner; and (5) other letters and cases. The basic thrust of petitioner’s argument is that he was defrauded by Hoyt and that, if he were held responsible for penalties and interest incurred as a result of his investment in a tax shelter, it would be inequitable and against public policy. Petitioner’s argument is not persuasive. 15 Bales v. Commissioner, T.C. Memo. 1989-568, involved deficiencies determined against various investors in several Hoyt partnerships. This Court found in favor of the investors on several issues, stating that “the transaction in issue should be respected for Federal income tax purposes.” Taxpayers in many Hoyt-related cases have used Bales as the basis for a reasonable cause defense to accuracy-related penalties. This argument has been uniformly rejected by this Court and by the Courts of Appeals for the Sixth and Tenth Circuits. See, e.g., Mortensen v. Commissioner, 440 F.3d 375, 390-391 (6th Cir. 2006), affg. T.C. Memo. 2004-279; Van Scoten v. Commissioner, 439 F.3d 1243, 1254-1256 (10th Cir. 2006), affg. T.C. Memo. 2004-275; Sanders v. Commissioner, T.C. Memo. 2005-163; Hansen v. Commissioner, T.C. Memo. 2004-269.Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Next
Last modified: May 25, 2011