DocketNumber: Docket No. 15504-90
Citation Numbers: 63 T.C.M. 3046, 1992 Tax Ct. Memo LEXIS 316, 1992 T.C. Memo. 294
Judges: GOLDBERG
Filed Date: 5/19/1992
Status: Non-Precedential
Modified Date: 11/21/2020
*316 Decision will be entered under Rule 155.
MEMORANDUM OPINION
GOLDBERG,
Respondent determined additions to petitioner's Federal income tax for the years 1980, 1981, and 1982 due to disallowed deductions and credits from an investment in a tax shelter, as follows:
Additions to Tax | |||
Year | Sec. 6653(a)(1)(A) | Sec. 6653(a)(1)(B) | Sec. 6659(a) |
1980 | $ 29.95 | 1 | $ 179.70 |
1981 | $ 373.30 | $ 2,239.80 | |
1982 | $ 15.39 | - |
*317 Respondent erroneously set forth the additions to tax for and negligence as under
After a concession, the sole issue for our decision is whether petitioner is liable for the additions to tax for negligence for the years in question.
Some of the facts have been stipulated and are so found. The stipulation of facts and attached exhibits are incorporated by this reference. Petitioner resided in San Francisco, California, when he filed his petition.
Petitioner is a physical education teacher at Canada College in Redwood City, California. He holds a master's degree in physical education. In the years in question, he held and traded stock, operated two rental properties, traded in calls and*318 warrants, received installment payments for the sale of real estate, and operated a scuba charter business.
In 1982, petitioner made an investment in the Lone Star Limited Partnership (Lone Star), which purchased a master recording from the Sagittarius Recording Company. The ostensible purpose of Lone Star was to lease, promote, and distribute a master recording made by Willie Nelson.
Petitioner made this investment on the advice of his tax return preparer, Karen Fleming. He also attended a lecture by Jay Arrigo, a representative of Sagittarius Recording Company, who explained the purported tax advantages and earnings projections for Lone Star. Petitioner was strongly influenced in making the investment by the fact that his return preparer told him she had invested in Lone Star.
For tax year 1982, petitioner deducted his distributive share of partnership losses in the amount of $ 3,078 and claimed investment credit of $ 8,170, which gave rise to a tentative carryback adjustment in tax years 1980 and 1981. Petitioner carried back his investment credit because he had no tax liability for 1982.
On March 14, 1986, respondent issued a notice of Final Partnership Administrative *319 Adjustment (FPAA) as to Lone Star, disallowing all losses and investment tax credit claimed for tax year 1982 with respect to Lone Star on the basis that its activities were not engaged in for profit and lacked economic substance. Judicial review of this FPAA was obtained pursuant to section 6226. On February 10, 1989, a Tax Court decision was entered sustaining respondent's adjustments. Petitioner is bound by these determinations with respect to his distributive share of Lone Star partnership items. Secs. 6224 and 6226.
Respondent determined that petitioner is liable for the additions to tax provided in
Negligence under
On the basis of the record, we find that petitioner was negligent in making his investment in Lone Star. Petitioner's reliance on the opinion of his tax preparer was not reasonable or prudent. He testified that he had made no investigation of her credentials as a certified public accountant. He believed she received a commission on his investment. The fact that all the advice he received was from interested parties makes his reliance*321 on such advice unreasonable.
Petitioner had no experience or expertise in the recording industry. Before investing in the leasing program, he did not listen to the master recording. He did not seek independent appraisals and did not obtain independent advice on the economic viability of leasing master recordings.
Accordingly, the additions to tax under
1. All section references are to the Internal Revenue Code in effect for the years in issue. All Rule references are to the Tax Court Rules of Practice and Procedure.↩
1. 50 percent of the interest due on the underpayment of tax attributable to negligence or intentional disregard of rules and regulations.↩