- 23 -
may require a change of lifestyle.14 See Clayton v.
Commissioner, T.C. Memo. 2006-188; Barnes v. Commissioner, supra.
We also believe 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’ $35,000 offer to satisfy their estimated
approximately $575,000 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
14 Of course, the examples in the regulations are not meant
to be exhaustive, and petitioners’ situation is not identical to
that of the taxpayers in Fargo v. Commissioner, 447 F.3d at 714,
regarding 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, see, e.g., Keller
v. Commissioner, T.C. Memo. 2006-131, nor prevented the Courts of
Appeals for the Sixth, Ninth, and Tenth Circuits from affirming
our decisions to that effect in Hansen v. Commissioner, 471 F.3d
1021 (9th Cir. 2006), affg. T.C. Memo. 2004-269; 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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