- 52 -
offering memoranda in these cases, especially the discussions of
high writeoffs and risk of audit, should have alerted a prudent
and reasonable investor to the questionable nature of the
promised deductions and credits. See Collins v. Commissioner,
857 F.2d 1383, 1386 (9th Cir. 1988), affg. Dister v.
Commissioner, T.C. Memo. 1987-217; Sacks v. Commissioner, T.C.
Memo. 1994-217.
In each case, the projected tax benefits in the respective
offering memoranda exceeded petitioners' respective investments.
According to the offering memoranda, for each $50,000 investor,
the projected first-year tax benefits were investment tax credits
in excess of $82,500 plus deductions in excess of $39,000.
Specifically, the projected investment tax credits and deductions
for the Partnerships in the first year of the investment for each
$50,000 investor were as follows: $82,639 and $39,323 for
Scarborough in 1981; $84,813 and $40,671 for Phoenix in 1981;
$82,639 and $40,037 for SAB Recycling in 1982; and $83,712 and
$40,234 for SAB Reclamation in 1982.
For Mrs. Zenkel's gross $50,000 investment, the Zenkel's
claimed an operating loss in the amount of $40,100 and investment
tax and business energy credits in the amount of $83,712. As a
result of his gross $25,000 investment, Blount claimed a $20,520
operating loss and $42,402 in investment tax and business energy
credits. For their gross $25,000 investment, the Davids claimed
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