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operating losses and investment tax and business energy credits
related to the Partnerships:
Petitioners Investment Operating Loss IT + EC Credits
Reimann $25,000 $19,833 $33,428
Brodie 12,500 10,158 20,673
M. Yarnell 75,000 60,952 124,034
P. Yarnell 62,500 50,794 103,362
Therefore, like the taxpayers in Provizer v. Commissioner, T.C.
Memo. 1992-177, except for a few weeks at the beginning, none of
petitioners ever had any money in the Partnerships. A reasonably
prudent person would not conclude without substantial
investigation that the Government was providing significant tax
benefits to taxpayers who made no investment of their own
capital. McCrary v. Commissioner, 92 T.C. 827, 850 (1989).
The parties in these consolidated cases stipulated that the
fair market value of a Sentinel EPE recycler in 1981 and 1982 was
not in excess of $50,000. Notwithstanding this concession,
petitioners contend that they were reasonable in claiming credits
on their Federal income tax returns based upon each recycler
having a value of $1,162,666. In support of this position,
petitioners submitted into evidence preliminary reports prepared
for respondent by Ernest D. Carmagnola (Carmagnola), the
president of Professional Plastic Associates. Carmagnola had
been retained by the IRS in 1984 to evaluate the Sentinel EPE and
EPS recyclers in light of what he described as "the fantastic
values placed on the [recyclers] by the owners." Based on
limited information available to him at that time, Carmagnola
preliminarily estimated that the value of the Sentinel EPE
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