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MIT 85
On January 1, 1985, Fred and Bruce organized and promoted
MIT 85 as a general partnership. Its organization and operation
are similar to those of the partnerships previously described.
The four individuals and six partnerships who were investors
in MIT 85 were clients of BBPA. BBPA made the adjusting journal
entries of MIT 85 for 1985, 1987, and 1988. There were no
prospectuses or offering memoranda or terms sheets for MIT 85.
Some of the prospective investors in MIT 85, however, were given
a four-page document, prepared by BBPA, which described the tax
advantages of investing in MIT 85 and made projections to the end
of the partnership term. The document stated, in part:
In 1985, each unit investor will report a loss of
$100,000. During the next 10 years, each unit investor
will report taxable income ranging from $3,286 in 1986
to $11,560 in 1995. In 1996, each unit investor will
report taxable income of $41,263.
MIT 85 and Machise, and MPC, newly inserted as a
"subcontractor",19 entered into an employee leasing agreement,
dated January 1, 1985, under which MIT 85 would provide all of
the individual employees and independent contractors required by
Machise to conduct its business for the period January 1 through
December 31, 1985.
19Fred testified that he inserted MPC as a subcontractor in
order to deter questions by the creditors of Machise about
Machise's large liabilities to the partnerships. Additionally,
inserting MPC, in which Bucci was the principal partner, exposed
Bucci's assets to possible claims of MIT 85 in the event of
Machise's inability to pay its liabilities.
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