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conduct of Sunbelt's business; (5) that there was no established
market for the recyclers; (6) that there were no assurances that
market prices for virgin resin would remain at their current
costs per pound or that the recycled pellets would be as
marketable as virgin pellets; and (7) that certain potential
conflicts of interest existed.
Because petitioner was surprised at the price of the
recycler, petitioner and Storey discussed its value in relation
to Ulanoff's marketing opinion in the offering memorandum.
Because petitioner was also surprised at the tax benefits, he and
Storey discussed the kind and amount of deductions generated by
an investment in Sunbelt. During these discussions, petitioner
did not ask Storey to seek an expert opinion regarding the value
of the recycler. Petitioner never inquired about specific
details of the operation of the recyclers or the viability of the
recycler to end-users. Petitioners knew that Storey did not have
a background in plastics, but did not personally investigate
Sunbelt or PI.
During 1982, petitioners invested $50,000 in Sunbelt and in
return acquired a 6.19-percent limited partnership interest in
Sunbelt. On their 1982 Federal income tax return, petitioners
claimed a loss of $40,073 related to their investment in Sunbelt.
Petitioners also claimed an investment tax credit of $44,211 and
a business energy investment tax credit of $43,181. Petitioners
used $34,447 of these credits in 1982 and carried back unused
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