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investors may be subject to an increased “likelihood that a
Partner’s return will be subject to audit.”
g. Mr. Heitzman’s Purchase of Interest in Stonehurst
Sometime during 1979, Mr. Heitzman’s personal attorney had
told Gil Sherman, who was selling interests in Stonehurst, about
Mr. Heitzman’s possible interest in a tax shelter. During
December 1979, Sherman asked Mr. Heitzman if he would be
interested in purchasing an interest in Stonehurst in light of
his large income that year. Sherman was entitled to receive a
0.5-percent overriding production royalty as compensation for his
efforts in selling the partnership units.
Mr. Heitzman had heard from other purchasers of interests in
Stonehurst, including his personal attorney and “other
substantial business people”, that Stonehurst “was a good
investment”. He read the Stonehurst Memorandum, including the
statement in the Coburn report that there was an expected “90%
success ratio to be anticipated”. Sherman told Mr. Heitzman that
other investors in similar limited partnerships had “done well
and this one should be great”. Sherman said that they “were
going to make some money”. Mr. Heitzman concluded that
Stonehurst was a “good investment” with a “big write-off”.
Mr. Heitzman was favorably impressed because “it had been
researched by a large law firm out of Los Angeles”.
On December 17, 1979, Mr. Heitzman purchased 7 limited
partnership units in Stonehurst, at the stated price of $6,200
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