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concerning the legitimacy and tax status of the advertised
“investment”. A reasonable and prudent individual standing in
petitioner’s shoes would have had ample grounds for suspicion.
Moreover, as to petitioner’s visits to Hoyt’s establishments, we
decline to find that petitioner during that time adequately
investigated the legitimacy of TBS 89-1. Petitioner never even
asked to see, nor did he actually see, any of Hoyt’s records
concerning TBS 89-1. We conclude that petitioner’s failure to
investigate properly was inconsistent with what a reasonable and
ordinarily prudent person would have done under the
circumstances; i.e., it was negligence.
Petitioner did not demonstrate due care in claiming a loss
from TBS 89-1 for 1991. In order to prepare his tax return for
that year, petitioner supplied the Hoyt organization with all of
his tax information (except his reported loss from TBS 89-1), and
he allowed the organization to prepare his return by adding to
his information a $92,961 loss that purportedly flowed from his
participation in TBS 89-1. Notwithstanding the substantial
amount of that reported loss, and the fact that it was
significantly greater than petitioner’s payments to the Hoyt
organization,7 petitioner never took his return to a professional
7 As of the time that petitioner filed his 1991 return, he
had paid the Hoyt organization $26,785 and had received $15,987
in tax refunds for 1988, 1989, and 1990 (and was awaiting a
refund of $4,053 for 1991). We also note that petitioner’s 1988
(continued...)
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