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produced from the coal property subsequent to that time. The
mines were not reclaimed or restored to their premining
condition, and ERL forfeited the reclamation bonds it had posted
in order to obtain the mining permits.
Mr. and Mrs. Bauman
Neither Bauman nor Mrs. Bauman had any formal education,
training, or experience in coal mining. Bauman purchased two-
thirds of a partnership unit in ERL. This purchase was motivated
at least in part by Bauman’s prior participation in a coal mining
project promoted and managed by McIntyre. Many of the partners
in Bauman’s law firm were also involved in McIntyre-related coal
projects. Several of these partners were also limited partners
in ERL. The members of the law firm routinely discussed with one
another the potential opportunities presented by an ERL
investment. Bauman’s preinvestment research of ERL was
principally limited to these intrafirm discussions and a review
of the information contained in the offering materials.
OPINION
Petitioners maintain that respondent has erroneously
determined that they are liable for the deficiencies, additions
to tax, and increased interest set forth at the beginning of this
opinion. The essence of petitioners’ argument is twofold.
First, petitioners maintain that ERL was a legitimate entity
organized and managed with a true and objective profit motive.
Petitioners also contend that they invested in ERL only after
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