- 20 -
provide significant information about his accountant's
qualifications as an adviser concerning the transaction in issue.
The projected tax benefits in the offering memorandum
exceeded petitioners' investment. According to the offering
memorandum, for each $50,000 investor, the projected first-year
tax benefits were investment tax credits in the amount of
$84,813, plus deductions in the amount of $40,586. As a result
of petitioners' $25,000 investment in Resource, petitioners
claimed an operating loss in the amount of $20,533 and investment
tax and business energy credits totaling $42,402 on their 1981
return. The direct reduction in petitioners' 1981 Federal income
tax, from the investment tax credits alone, was 170 percent of
their cash investment. Therefore, like the taxpayers in Provizer
v. Commissioner, T.C. Memo. 1992-177, "except for a few weeks at
the beginning, petitioners never had any money in * * *
[Resource]."
Petitioner's failure to seek explanations of the portions of
the offering memorandum that he did not understand, and his
indifference to the warnings and caveats contained therein,
indicate that he did not rely upon the offering memorandum to any
significant extent. Particularly in view of the
disproportionately large tax benefits claimed on petitioners'
1981 Federal income tax return, relative to the dollar amount
invested, further investigation of the Resource transaction
clearly was required. A careful consideration of the materials
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011