Mark Friedman - Page 11

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               By 1981 Friedman was very familiar with the typical content            
          of a prospectus or private offering memorandum.  In addition to             
          his professional experience, Friedman has been an active investor           
          since 1973.  From 1973 to 1981 Friedman invested in a "great                
          number" of publicly traded stocks and private placements.  His              
          approach to those investments was thorough and methodical:                  
          Friedman read the prospectus or private offering memorandum,                
          spoke to an expert in the pertinent industry, investigated the              
          risk factors described in the offering materials, consulted                 
          industry reports, and spoke to other active investors or lawyers.           
          Friedman is "sophisticated enough to know that in any tax                   
          investment the underlying economics have to be legitimate."                 
               In 1981 Friedman acquired a 1.547-percent1 interest in                 
          Clearwater for $12,500.  As a result of his investment in                   
          Clearwater, on his 1981 Federal income tax return Friedman                  
          claimed an operating loss in the amount of $10,002.  Of a total             
          of $21,584 in investment tax and business energy credits,                   





          1    The parties stipulated that Friedman owned 25 percent of the           
          profits, losses, and capital of Clearwater during taxable year              
          1981.  However, Friedman's 1981 Schedule K-1, Partner's Share of            
          Income, Credits, Deductions, etc., attached to Clearwater's 1981            
          partnership return, reports that he owned a 1.547-percent                   
          interest in Clearwater.                                                     







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Last modified: May 25, 2011