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State and local tax refunds, capital gains, and other sources in
excess of $300,000.
In 1982, Mrs. Zenkel acquired a 9-percent limited
partnership interest in SAB Reclamation for a gross investment of
$50,000, without taking into consideration any sales commission
rebate or advance royalty distribution. Based on Mrs. Zenkel's
interest in SAB Reclamation, on their 1982 Federal income tax
return the Zenkels claimed an operating loss in the amount of
$40,100 and investment tax and business energy credits totaling
$83,712. Their total credits claimed, $85,547, were subject to a
limitation of $62,841. The Zenkels carried back the unused
portion of the credits to 1979 and 1980. Respondent disallowed
the Zenkels' claimed operating loss and credits related to Mrs.
Zenkel's investment in SAB Reclamation.
The Zenkels learned of the Plastics Recycling transactions
and SAB Reclamation from Robert Steele (Steele), an accountant
with Becker Co. At the time, Becker Co. prepared the Zenkels'
Federal and State income tax returns. Mr. Zenkel had earlier met
Steele and Becker on separate occasions during the mid-1970's.
Mr. Zenkel initially met Becker in connection with some
investment offerings with which Mr. Zenkel was involved. After
Mrs. Zenkel also met Steele, the couple hired Becker Co. to
handle their tax and related accounting needs.
Steele provided Mrs. Zenkel with a copy of the SAB
Reclamation offering memorandum. Mrs. Zenkel looked it over and
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