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the assumption agreements. The letter explained that the limited
partners were required to sign this agreement in order to reduce
their liabilities. In return, the principal payment date would
be extended until December 31, 2001, and the recourse liabilities
reduced by a consolidation of operations with another
partnership, Consolidated Petroleum Equities, Ltd. (CPE). The
revenues of this new entity were to be applied at a rate of 0.01
percent of “the value of CPE’s share of production from its wells
before deducting royalties or expenses” for every “$1,000 of
outstanding assumed liabilities”. The letter contained no
financial projections to illuminate how this would be done. The
proffered documents also purported to release Wind River,
Freemond, and other principals from any liability arising from
Stonehurst. On the advice of counsel, Mr. Heitzman did not sign
this agreement.
On March 23, 1987, Freemond sent a note to the limited
partners, exhorting them to execute the documents described
above. Freemond’s note also said that the enclosed partnership
Form K-1 would be the last one sent because Stonehurst was being
dissolved.
On February 24, 1987, on cross-motions for partial summary
judgment in the case under docket No. 33436-84, this Court
granted respondent’s motion and denied Mr. Heitzman’s motion.
Heitzman v. Commissioner, T.C. Memo. 1987-109. We held that, as
a matter of law, Mr. Heitzman was not entitled to deduct his
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