Robert R. Gray, Jr. and Vickey L. Gray - Page 11

                                       - 11 -                                         
          no analysis in the prospectus of the potential nontax, economic             
          profitability of the leasing program.  Furthermore, there is no             
          information in the prospectus regarding the marketability of the            
          master recordings that Encore intends to lease nor any                      
          information concerning how master recordings can be marketed.               
               Finally, the prospectus contains a letter from Henry D.                
          Nunez, a tax attorney, stating the following:                               
               upon request by Encore, we will assist a lessee and                    
               their counsel and accountants if the Internal Revenue                  
               Service challenges the tax structure of the transaction                
               as set forth in the Opinion and the lessee is unable to                
               reach a satisfactory resolution at the initial audit                   
               level.  Such assistance would include advice in                        
               connection with their appearances before the appellate                 
               division of the Internal Revenue Service.  We would                    
               also be available to assist the lessee’s counsel in                    
               defense before the U.S. District Court, U.S. Tax Court                 
               or the U.S. Court of Claims.                                           
               In light of the content of the Encore prospectus, we doubt             
          the sincerity of petitioners' contention that they examined its             
          pertinent parts.  Even a simple review of the information                   
          contained in the prospectus should have raised serious questions            
          in the minds of ordinarily prudent investors.                               
               Based upon careful consideration of the record, we find that           
          petitioners have failed to show that the instant case differs in            
          any meaningful respect from the previously decided cases in which           
          we held the taxpayers liable for the additions to tax for                   
          negligence in connection with their participation in Encore.                
          Accordingly, petitioners are liable for the additions to tax                






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  Next

Last modified: May 25, 2011