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Mr. Schulman promoted the partnerships by representing that
each limited partnership interest would be entitled to an
interest deduction in the first year equal to the partner's cash
capital contributions. The purported interest deductions for the
first year were generated through a circular transfer of funds
among several entities, including foreign entities in Panama and
the Netherlands Antilles. The transactions occurred between
December of 1982 and December of 1983.
On August 22, 1983, the IRS and Mr. Schulman executed a
preliminary agreement entitled "SETTLEMENT PLAN AGREEMENT". The
agreement's "RECITALS" section stated:
2.1 IRS is presently auditing
SCHULMAN'S individual tax returns (IRS Form 1040) for
the years 1977 through 1982. Additionally, IRS intends
to audit SCHULMAN'S 1983 individual tax return (IRS
Form 1040).
* * * * * * *
2.4 IRS and SCHULMAN desire to amicably
settle all questions relating to SCHULMAN'S individual
tax returns and the deductions taken by the investors
in connection with their investment in the SCHULMAN
Partnerships. * * *
2.5 This document is intended to be an
agreement in principle establishing the concepts upon
which a formal settlement agreement will be drafted.
Both the IRS and SCHULMAN shall exercise the utmost
good faith in attempting to achieve the final
settlement of the matters described herein.
Nevertheless, SCHULMAN and the IRS acknowledge that the
concepts established hereunder may result in unforeseen
consequences which may render settlement impossible.
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Last modified: May 25, 2011