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in 1982. As a result of his interest in SAB Recycling, on his
1982 return petitioner claimed an operating loss in the amount of
$3,974 and investment tax and business energy credits in the
amount of $8,002.5 Petitioner carried back an additional $262 in
business energy credits to 1979. Except for $20 of the $344 loss
from SAB Recovery that petitioner claimed on his 1982 return,
respondent disallowed these amounts in full.
Petitioner learned of the Plastics Recycling transactions in
the fall of 1981 from Stuart Becker. Becker had been preparing
the tax returns for SBA and petitioner since the early 1960's.
He also provided tax advice, tax-oriented financial advice, and
representation services before the Internal Revenue Service.
Becker characterized his relationship with petitioner during the
years at issue as social. Both men were recently divorced at the
time, and they had frequent discussions about personal matters as
well as SBA.
In the fall of 1981 Becker sent a copy of the SAB Recovery
offering memorandum to petitioner and "told him to look at it and
call me with any questions." Petitioner subsequently telephoned
Becker and asked him to explain the investment. Becker gave
petitioner a synopsis of the transaction and its tax aspects. He
5 On his 1982 return, petitioner claimed a total loss of
$4,318 ($3,974 from SAB Recycling and $344 from SAB Recovery).
Petitioner reported a combined investment tax and business energy
credit from SAB Recycling in the amount of $8,264 (separately,
each of the credits was in the amount of $4,132). The business
energy credit was subject to a limitation of $3,870.
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