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Southampton investment was that "If they would do everything
that they said in the booklet, it looked okay to him."
Based on his discussions with Cunningham and Parnell, and
on his own research of the music industry, petitioner decided to
invest in Southampton and signed a master recording lease
agreement on December 22, 1982. Petitioner was aware of the tax
benefits expected from the investment. The availability of
those benefits for the 1982 taxable year had an impact on
petitioner's decision to sign the lease agreement prior to the
end of the year. Pursuant to the agreement, petitioner was to
pay Southampton a total of $10,5003 for a one-fourth leasehold
interest in a master recording featuring Ray Pillow, a country-
western singer. The lease was for a term of 5 years and 10
months. Petitioner had not listened to or received a copy of
the Ray Pillow master recording prior to investing in
Southampton.
Petitioner's master recording was to be distributed as a
phonograph album by Indigo Music Co. (Indigo), a distributor
recommended to petitioner by Southampton. Petitioner did not
meet or negotiate with anyone from Indigo prior to investing in
Southampton. Pursuant to his agreements with Indigo and
3 Petitioner paid $8,400 on or about the date the lease was
signed and reported that amount as rental expense on his 1982 tax
return. The remaining $2,100 was paid approximately 1 year
thereafter and reported as rental expense on petitioner's 1983
return.
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