Jeffrey I. and Roberta H. Stone - Page 26

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               The Stones placed into the record of their case several                
          documents, ostensibly submitted as evidence that they monitored             
          their investments in Northeast.  These included unaudited                   
          financial statements of Northeast prepared by nonindependent                
          accountants from 1981 to 1985, Forms K-1 from 1984 and 1986, a              
          1983 report prepared by Finkle & Co. describing the accounting              
          procedures and controls for the recycling operations at PI, and a           
          1983 update from PI noting that "market prices for polyethylene             
          resin have remained relatively low * * * [and] the Sentinel                 
          recyclers * * * have not been profitable."  Stone did not testify           
          or otherwise indicate that he ever examined these documents.  He            
          spoke to Roberts once about the performance of the Northeast                
          partnership and learned that it was experiencing difficulty                 
          placing the machines.  We decline to infer from these documents             
          that he actively monitored his investment in Northeast.                     
               The parties in these consolidated cases stipulated that the            
          fair market value of a Sentinel EPE recycler in 1981 and 1982 was           
          not in excess of $50,000.  Notwithstanding this concession,                 
          petitioners contend that they were reasonable in claiming credits           
          on their Federal income tax returns based upon each recycler's              
          having a value of $1,066,666 in the Hyannis partnership and                 
          $1,162,666 in the Northeast partnership.11  In support of this              

          11   The Hyannis partnership involved 6 machines on which the               
          partnership set a value of $6,400,000.  The Northeast partnership           
          involved 7 machines on which the partnership set a value of                 

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