- 26 -
for new resin pellets would remain at their then current level.
Both petitioners stipulated that information published prior to
the Sentinel EPE Recycling transactions indicated that the price
of polyethylene was declining during the fourth quarter of 1981.
One of respondent's experts, Steven Grossman, explained that the
price of plastics materials is not directly proportional to the
price of oil. In his report, he testified that less than 10
percent of crude oil is utilized for making plastics materials,
and that studies have shown that "a 300% increase in crude oil
prices results in only a 30 to 40% increase in the cost of
plastics products." Moreover, during 1980 and 1981, in addition
to the media coverage of the so-called oil crisis, there was
"extensive continuing press coverage of questionable tax shelter
plans." Zmuda v. Commissioner, 731 F.2d 1417, 1422 (9th Cir.
1984), affg. 79 T.C. 714 (1982).
Petitioners' reliance on Krause v. Commissioner, 99 T.C. 132
(1992), affd. sub nom. Hildebrand v. Commissioner, 28 F.3d 1024
(10th Cir. 1994), and Rousseau v. United States, 71A AFTR 2d 93-
4294, 91-1 USTC par. 50,252 (E.D. La. 1991), is misplaced. The
facts in Krause v. Commissioner, supra, are distinctly different
from the facts of these cases. In the Krause case, the taxpayers
invested in limited partnerships whose investment objectives
concerned enhanced oil recovery (EOR) technology. The Krause
opinion states that during the late 1970's and early 1980's, the
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