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The tax opinion contained in the offering materials was
exhaustive. It discussed essentially all relevant Code sections,
Treasury regulations, and revenue rulings pertaining to the
structure of ERL and its transactions. Much case law was also
presented, explaining how the courts had interpreted the various
Code sections, regulations, and rulings discussed therein.
The accounting projections accompanying the offering
materials included an estimate of ERL’s taxable income for 1980,
1981, and 1982. Also included in the accounting projections was
an analysis of ERL’s estimated mining operations for the 29-year
period ending with 2009. The accounting projections estimated
that ERL would realize a net loss of $10,105,000 in 1980.
Similarly, for 1981 and 1982, net losses were estimated to be
$9,200,000 and $7,712,500, respectively. As previously stated,
all but 1 percent of these losses were allocable to the limited
partners pursuant to the partnership agreement. The accounting
projections further explained that, in light of this loss
forecast, and based on the limited partners’ cash capital
contributions, the ratios of the tax deductions to the cash
capital contributions would be 333 percent, 304 percent, and 255
percent, respectively, for 1980, 1981, and 1982.
The accounting projections also contained a tabular analysis
of projected mining operations. It was projected that ERL would
sell 200,000 tons of coal in 1981. The projections increased
annually, and during the period from 1989 through 2009 it was
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