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petitioner argues that the Federal Government, by virtue of the
energy tax credit, was encouraging this type of investment.
Petitioner failed to explain how the so-called oil crisis,
or the media coverage thereof, provided a reasonable basis for
him to invest in Northeast and claim the associated tax
deductions and credits. Instead, he testified that he made the
decision with respect to Northeast "primarily as a speculation".
The offering memorandum noted several business risks associated
with Northeast, including the circumstances that there was no
established market for the recyclers, that there could be no
assurances that the recycled resin pellets would be marketable as
new resin pellets, and that there could be no assurances that
prices for new resin pellets would remain at their then current
level. Moreover, during 1980 and 1981, in addition to the media
coverage of the so-called oil crisis, there was "extensive
continuing press coverage of questionable tax shelter plans."
Zmuda v. Commissioner, 731 F.2d 1417, 1422 (9th Cir. 1984), affg.
79 T.C. 714 (1982). Furthermore, as respondent's expert Grossman
noted in his written report, "a 300% increase in crude oil prices
results in only a 30 to 40% increase in the cost of plastic
products."
The anticipated tax benefits, on the other hand, were stated
in the offering materials. According to the Northeast offering
memorandum, the projected benefits for each $50,000 investor were
investment tax credits in 1981 of $84,813 plus deductions in 1981
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