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While the three petitioners paid cash of $16,500, their
total investment credit and business energy credits were $31,098,
and they claimed total operating losses of $14,916 in 1981 alone.
On their 1981 tax returns, Triemstra and Cohn each claimed a
qualified investment with an unadjusted basis of $56,542, and
Kravitz claimed such an investment of $42,407. The three
partners in Bellvine claimed a total qualified investment with a
basis of $155,491. With respect to the significance of the full
investment, see Anderson v. Commissioner, 62 F.3d 1266 (10th Cir.
1995), affg. T.C. Memo. 1993-607.
Petitioners further contend that their failure to look
beyond the Northeast offering memorandum was reasonable.
Petitioners argue: (1) It was reasonable for them not to look
beyond the offering memorandum but to accept its representations
at face value because Federal and State securities laws
discourage false or misleading statements, and (2) petitioners'
familiarity with offering memoranda reasonably led them to
believe that the cautionary language contained in the Northeast
offering memorandum was for the exclusive benefit of the promoter
and could therefore be disregarded.
Kravitz read the entire Northeast offering memorandum. The
memorandum, and particularly the projections of anticipated
business profits, supposedly convinced Kravitz that the Northeast
transaction was a real business proposal. Kravitz did not check
the figures in the offering memorandum or verify the charts with
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