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T.C. Memo. 1994-329; Sacks v. Commissioner, T.C. Memo. 1994-217;
Rogers v. Commissioner, T.C. Memo. 1990-619.
3. The Private Offering Memoranda
In addition to purportedly relying on Becker and Miller,
petitioners maintain that they reasonably relied upon the
offering memoranda distributed by the Partnerships.
The offering memoranda included numerous caveats and
warnings with respect to the Partnerships, including: (1) The
substantial likelihood of audit by the IRS and a likely challenge
of the purported value of the recyclers; (2) the general
partner's lack of experience in marketing recycling or similar
equipment; (3) the lack of an established market for the
recyclers; and (4) uncertainties regarding the market prices for
virgin resin and the possibility that recycled pellets would not
be as marketable as virgin pellets. In addition, the offering
memoranda noted a number of conflicts of interest, including
Miller's interest in F & G Corp. and his representation of
Burstein, PI, and Raymond Grant, who was the sole shareholder of
ECI Corp. A careful consideration of the materials in the
respective offering memoranda, especially the discussions of high
writeoffs and risk of audit, should have alerted a prudent and
reasonable investor to the questionable nature of the promised
deductions and credits. See Collins v. Commissioner, 857 F.2d
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