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Porter was whether he believed a polyethylene or polystyrene
recycler was economically viable. They did not discuss the
Sentinel EPE recycler, the Plastics Recycling transactions, or
plastics recycling in general. Fredericks will not be relieved
of the negligence additions to tax based upon his purported
reliance on Steele, Cohen, and Porter.
3. The Private Offering Memoranda
Petitioners in very general terms maintain that they
reasonably relied upon the offering memoranda and the tax opinion
letters appended thereto. However, petitioners' testimony and
actions indicate that they did not give due consideration to all
of the information set out in the offering memoranda and that
they ultimately did not place a great deal of reliance, if any,
on the representations therein.
The offering memoranda raised 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
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