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January 1, 1992, Bucci, MPC, MIT 80, and BBPA executed an
agreement, prepared by Fred, whereby Bucci agreed to transfer 500
shares of his stock in MIT Transportation Co., Inc., to MPC. The
agreement recited that MIT 80 agreed to accept the 500 shares
from MPC in full payment of the $1,295,108 due to it from MPC.
None of the parties to this transaction were represented by
counsel.
No one made a formal appraisal of the MIT Transportation Co.
stock. Bruce nevertheless issued a memorandum to the MIT 80
partners explaining that since the value of the MIT Transporta-
tion stock was $250,000, MIT 80 could claim a bad debt deduction
for 1992 in the amount of $1,045,108 ($1,295,108 - $250,000).
The stock sale may be depicted as follows:
Amount owed MIT 80 by MPC from 1988 to (1992) $1,295,108
Claimed value of MIT Transportation Co., (250,000)
Inc. stock given to MPC, then to MIT 80
Amount BBPA advised MIT 80 partners to 1,045,108
claim as a loss in 1992
The partners were allocated pro rata amounts of this
$1,045,108 loss in 1992.
None of the investors in MIT 80 received more from the
operation of the partnership than he had invested.
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