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Ridge Energy may have had with Saxon Energy, (2) have or attempt
to obtain an appraisal of the energy systems used by Ridge
Energy, (3) know how those energy systems were to be marketed, or
(4) know specifically how Ridge Energy was to make a profit.
During 1983, based on the advice of Mr. Amsterdam and his
review of the prospectus, petitioner invested approximately
$13,000 in, and became a 14.1-percent partner of, Ridge Energy.
During that year, Ridge Energy had 15 partners, including Mr.
Amsterdam and Mr. Amsterdam's partner Mr. Coscia.
At all relevant times before and after petitioner invested
in Ridge Energy, the investments of one or both petitioners
consisted of their residence, certain savings bonds, interest-
bearing accounts at certain financial institutions, a life
insurance policy, two mortgages that petitioner inherited from
his father around 1975, and an interest in Tricat, a facility in
which petitioner invested around the time he joined the Menlo
Group on the advice of another physician employed by that group,
at which certain medical tests were administered, and to which
certain physicians employed by the Menlo Group referred many of
their patients.
On August 9, 1984, Ridge Energy filed Form 1065 (U.S.
Partnership Return of Income) for 1983 (1983 partnership return)
in which Ridge Energy claimed a loss of $98,900 that consisted of
lease expenses of $96,000, management fees of $2,800, and legal
fees of $100. Ridge Energy claimed a basis of $1,485,000 for
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