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Southampton, petitioner was to receive royalty payments from
Indigo on album sales, and in turn, petitioner was to make
additional rental payments to Southampton based on a percentage
of net profits earned. There is no evidence in the record that
petitioner has ever received royalty payments from Indigo or
that any additional rental payments have been made to
Southampton.4
Pursuant to the lease agreement, Southampton agreed to pass
to petitioner his one-fourth share of any investment tax credit
generated by the Ray Pillow master recording. On his 1982 tax
return, petitioner reported a tentative regular investment
credit from his Southampton investment of $21,250. This amount
was determined based on a value for the Ray Pillow master
recording reported to petitioner by Southampton of $850,000.5
Petitioner never obtained an independent appraisal of the Ray
Pillow master recording but relied solely on the value reported
to him by Southampton.6 Of the total investment tax credit of
4 On his 1984 tax return, however, petitioner reported $15 in
"Other Income" from his Southampton investment.
5 Petitioner's tentative regular investment tax credit was
determined by multiplying the regular investment tax credit
percentage (10 percent) by petitioner's one-fourth share of the
total value of the master recording reported by Southampton (10
percent x ($850,000 x �) = $21,250).
6 Petitioner introduced into evidence two documents that he
received from Southampton purporting to be appraisals of the Ray
Pillow master recording. Petitioner's reliance on these
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