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In 1980 Vincent Farrell (Farrell) acquired a limited
partnership interest in SAB Associates and in 1982 he acquired a
limited partnership interest in SAB Resource Reclamation
Associates (SAB Reclamation).3 SAB Reclamation purported to
lease four Sentinel EPE recyclers in a series of transactions
substantially identical to those in the Clearwater Group limited
partnership (Clearwater), the partnership considered in Provizer
v. Commissioner, T.C. Memo. 1992-177. SAB Associates invested in
plastics recycling partnerships like SAB Reclamation and
Clearwater.4 On their 1981 and 1982 joint Federal income tax
returns, petitioners claimed their pro rata share of SAB
Associates' and SAB Reclamation's partnership losses and tax
credits.
In a notice of deficiency dated November 30, 1987,
respondent determined deficiencies in petitioners' 1981 Federal
income tax. Respondent disallowed petitioners' claimed losses
and tax credits related to SAB Associates and determined
additions to tax under section 6659 for valuation overstatement
and under section 6653(a)(1) and (2) for negligence. Respondent
also determined that interest on the deficiency accruing after
3 Petitioners own a 4.5-percent limited partnership interest
in SAB Reclamation. The record does not disclose the amount of
petitioners' percentage interest in SAB Associates.
4 SAB Associates was formed to engage in tax straddle
investments. During 1981, it ceased engaging in tax straddle
investments and changed its function to leasing Sentinel EPE
recyclers.
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Last modified: May 25, 2011