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of a master recording or the likelihood of success of a
recording artist.
In November 1982, Cunningham provided petitioner with a
promotional booklet entitled "Southampton Music Company: 1982-
1983 Program". The promotional booklet emphasizes the tax
benefits of investing in a master recording rather than any
economic benefits that could be expected. The booklet includes
a 36-page tax opinion by Joseph Wetzel, an attorney in Portland,
Oregon. The tax opinion discusses the tax benefits of the
investment and potential tax problems that could be raised by
the Internal Revenue Service and ways to avoid them. The
promotional booklet also contains a chart entitled "Table of
Advance Lease Payments and First Year Tax Benefits" with four
levels of escalating investments with escalating tax benefits.
For example, according to the chart, a cash investment of
$31,000 in a master recording valued at $400,000 would yield in
the first year an investment tax credit of $40,000 and a tax
deduction of $26,000.
Petitioner asked William Parnell, an acquaintance who was a
return preparer and an enrolled agent before the Internal
Revenue Service, to review the Southampton promotional booklet.
According to petitioner,2 Parnell's assessment of the
2 Parnell did not testify in this case.
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