Albert R. and Phyllis F. Dworkin - Page 18

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            There was ample case law and commentary at the time of                                         
            petitioners' investment addressing the disallowance of tax                                     
            benefits flowing from transactions lacking economic substance.                                 
            Indeed, petitioner testified that had he been aware of the                                     
            nonrecourse nature of the debt issued by F & G he would not have                               
            invested in Northeast.  Yet the nonrecourse nature of the debt                                 
            issued by F & G was unambiguously disclosed in multiple sections                               
            of the offering memorandum.  More significantly, the transaction                               
            here was a sham, and that was not the case in Epsten.  Here                                    
            petitioner accepted an inflated value of $1,162,666 each for                                   
            machines with an actual value not in excess of $50,000, and                                    
            petitioner made no investigation of the valuation.  The Epsten                                 
            case, involving the interpretation of recently enacted law, does                               
            not support petitioners' investment in a sham transaction                                      
            involving inflated valuations without investigation.                                           
                  Finally, petitioners argue that they had a business motive                               
            for their investment in Northeast, independent of any tax                                      
            benefits.  Their alleged intent in making the investment was to                                
            obtain a stream of rental income generated from the resale and                                 
            reuse of recycled plastic.  Petitioner was aware that plastics                                 
            were oil derivatives.  Petitioner argues, in general terms, that                               
            because of the media coverage of a supposed oil crisis in the                                  
            United States during 1981, he believed that an investment in                                   
            plastics recycling had good economic potential.  In addition,                                  

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