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their discussions of tax advantages, risk of audit, and risk of
litigation in the Tax Court, would have alerted a prudent and
reasonable investor to the questionable nature of the promised
deductions and investment tax credits. To be sure, although the
first page of the prospectus refers to an "exciting business
opportunity while taking advantage of current tax laws," it
mentions very little about that opportunity. Instead, it heavily
emphasized the benefits derived from the investment tax credit.
Encore's prospectus in substance contains only one page that
discusses the Gospel record market. That discussion lacks the
slightest degree of specificity and is otherwise presented in
very general terms. Further, the prospectus does not
specifically address the master recordings leased by Encore, the
quality of such recordings, nor any other facets of the Encore
program.
Although the prospectus contains a section entitled “How
Our Program Works,” that section is a single page in length and
contains a mere four paragraphs. Three paragraphs are devoted to
the tax aspects of the program, while one paragraph refers to the
lease agreement. The remainder of the page outlines in tabular
form the amount of advance payment required from the lessee and
the amount of investment tax credit passed through to the lessee.
The "Financial Section" of the prospectus contains two
paragraphs and discusses the investment tax credit available with
respect to the sound recordings and computer software. There is
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Last modified: May 25, 2011