-4-
Pennsylvania (Budd Co.) manufactured the containers. The
refrigerated containers controlled the atmosphere for post-harvest
preservation and transportation of perishable agricultural
commodities. In 1982, FoodSource sold a container for $260,000.
Petitioner was introduced to the FoodSource program through
Skip Stewart, who received a commission for each container sold.
Among other things, Mr. Stewart informed petitioner of the
potential tax advantages petitioner could expect to receive from an
investment in the FoodSource program.
FoodSource supplied petitioner with information about its
containers and program. Petitioner engaged a Richmond, Virginia,
law firm to review the FoodSource documentation.
Petitioner did not investigate the reasonableness of the
container’s purchase price, the practicality of owning a fractional
interest in a container, or the viability of the FoodSource
program.
In 1982, petitioner purchased a one-half interest5 in
FoodSource container No. 506622. The price for petitioner’s one-
half interest was $130,000. Petitioner paid $26,000 in cash and
gave a nonrecourse note for the balance. Subsequently, he exchanged
a recourse note for the nonrecourse note.
Although petitioner expected the FoodSource container to
generate rental income sufficient to pay for the cost of the
5 The remaining 50-percent interest was purchased by
petitioners’ neighbor, Tom Ream.
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Last modified: May 25, 2011