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Petitioners each argue that because plastics materials are
oil derivatives, they reasonably believed that the Partnership
transactions had good economic potential in light of the alleged
oil crisis in the United States during 1981. However,
petitioners failed to explain exactly how such supposed oil
crisis provided a reasonable basis for them to invest in the
Partnerships and claim the associated tax deductions and credits.
The offering materials warned that there could be no
assurances that prices for new resin pellets would remain at
their then current level. One of respondent's experts, Steven
Grossman, explained that the price of plastics materials is not
directly proportional to the price of oil. In his report, he
stated that less than 10 percent of crude oil is utilized for
making plastics materials, and that studies have shown that "a
300% increase in crude oil prices results in only a 30 to 40%
increase in the cost of plastics products." Moreover, during
1980 and 1981, in addition to the media coverage of the so-called
oil crisis, there was "extensive continuing press coverage of
questionable tax shelter plans." Zmuda v. Commissioner, 731 F.2d
1417, 1422 (9th Cir. 1984), affg. 79 T.C. 714 (1982).
Spears placed into the record several articles from Modern
Plastics and an energy projections report from the U.S.
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