-4-
provided petitioner with a private placement memorandum (which was
more than an inch thick) for the partnership, which petitioner read
“from cover to cover”. Williams also provided petitioner with two
videotapes that were represented to be comparable to those that the
partnership would be marketing. Petitioner watched the tapes at
his home and recognized the moderator on the tapes as a well-known
and respected physician. Petitioner was also familiar with the
favorable reputation enjoyed by Hahnemann.
A significant portion of the private placement memorandum was
dedicated to a discussion of the tax aspects of an investment in
the partnership. The private placement memorandum contained a
summary of the offering which, in pertinent part, stated:
ESTIMATED TAX EFFECT
PER $17,000 UNIT:
Although Therapeutics CME Group, L.P.
(“Partnership”) may have income from its
operations, for illustration purposes,
the figures below do not take into
account any income and assume a 50% tax
bracket taxpayer. The Internal Revenue
Service (the “IRS” or “Service”) may
disallow any of the various elements used
in calculating Partnership expenses and
credits thereby reducing federal income
tax benefits on an investment.
1982 1983
Capital contribution $ 8,500 $ 8,500
Deductible Loss Equivalent 31,903 27,745
Tax Write-off to Cash
Investment Ratio 3.8 to 1 3.3 to 1
The private placement memorandum, as well as a tax opinion
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Last modified: May 25, 2011