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Receivable" from Century. Petitioners paid $4,850 for their
interest in the software. They paid $2,975 on November 2, 1983,
and $1,875 on April 30, 1984. Petitioners invested in the
accounting software through a purported joint venture with three
other parties whom they never met. Petitioners' one-fourth
interest in the software (for which they paid $4,850) was valued
by Century at $93,750 (one-fourth of $375,000). Petitioners did
not arrange for an independent appraisal of the software.
Petitioners signed an agreement provided to them by Dollar under
which they hired ALA Enterprises (ALA) on November 25, 1983, to
distribute the software. The distribution agreement said ALA
would sell 500 copies of the accounting software package for the
fee petitioners paid ALA. Petitioners never estimated how many
copies of the accounting software package would have to be sold
to make a profit.
Petitioners invested in accounting software instead of video
game software because petitioner heard from Alan Stone with Far
East Video, a client of SDSI which had exclusive distribution
rights in the United States from Nintendo for the Space Fever and
Sheriff video games, that the video game market was soft in 1983.
Petitioners did not talk to a tax or financial adviser
(other than Dollar) before they invested in the accounting
software.
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