- 126 -
that explains and justifies respondent's willingness to concede
that such income should be reduced to zero in the years affected.
Petitioners, however, do not agree that their income was a
sham, for if they did so, they would be required to agree that
their deductions were shams as well. In order to mitigate the
tax effects of this income, the partners instead extended their
losses into those later years. The did so either by investing in
other MIT partnerships, or, as Schweiger and Churchill have
testified, in other tax shelters promoted by Fred.36
The possibility of genuine future earnings for the
partnerships was virtually nonexistent as a practical matter.
Machise could wait for up to 11 years to repay its "compensation
fee". At that time, Machise would owe 115 percent of the amount
borrowed, plus late charges that, at least for some of the
partnerships, would have accumulated at a rate of 10 percent per
annum for 10 years. Even though the interest was simple
interest, the partners would be still be faced with collecting
from an entity that could be on a precarious footing.
Accumulation of the late charges over the permitted 10-year
36Schweiger identified one of those shelters as "the school
bus operation, Pat & Gordon". This Court, in Batastini v.
Commissioner, T.C. Memo. 1987-378, disallowed deductions claimed
by investors in that shelter, which was promoted by BBPA. One of
the participants in the school bus tax shelter was an entity
named Pat and Gordon, Inc. Our findings in that opinion show
that among the shareholders of Pat & Gordon were Anthony Bucci,
Joseph Ingemi, and Richard Adamucci, who, as noted above, also
acquired interests in MIT 80.
Page: Previous 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 NextLast modified: May 25, 2011