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reading the draft legal opinion and the evaluators' reports
included in the appendices. Cohn understood that the tax credits
were dependent upon the value of the Sentinel EPE recyclers.
Cohn contacted his tax preparer for the previous 25 years, Alvin
Shapiro, a C.P.A. Shapiro told Cohn that he was familiar with
this type of investment and cautioned Cohn to be careful of the
valuation. Shapiro told Cohn that he thought that valuation was
the predominant problem with this type of investment.
Nonetheless, Cohn accepted the representations in the offering
memorandum regarding the Sentinel EPE recyclers and their
purported value. Cohn consulted a tax professional; without even
seeing the offering memorandum, the tax professional told Cohn
that the problem in this type of transaction is the valuation of
the equipment. So Cohn was explicitly warned by his own tax
adviser that the possibility of abuse in this deal most likely
would be in the valuation, but Cohn chose to ignore his own
adviser and simply accepted the valuation set by the promoters.
Cohn also points out that he had syndicated many deals and had
great financial and professional success prior to the plastics
recycling investment. This impressive record only emphasizes
that he had the skills and resources to evaluate the deal under
consideration if he had exercised due care and had considered the
warning of his own long-time tax adviser. Cf. Chamberlain v.
Commissioner, 66 F.3d 729 (5th Cir. 1995), affg. in part and
revg. in part T.C. Memo. 1994-228.
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