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to receive a minimum of $60,000 and up to $140,000 from each
Partnership.
The offering memoranda list significant business and tax
risk factors associated with investments in the Partnerships.
Specifically, the offering memoranda state: (1) There is a
substantial likelihood of audit by the Internal Revenue Service
(IRS) and the purchase price paid by F & G Corp. to ECI Corp.
probably will be challenged as being in excess of fair market
value; (2) the Partnerships have no prior operating history; (3)
the general partner has no prior experience in marketing
recycling or similar equipment; (4) the limited partners have no
control over the conduct of the Partnerships' business; (5) there
is no established market for the Sentinel EPE recyclers; (6)
there are no assurances that market prices for virgin resin will
remain at their current costs per pound or that the recycled
pellets will be as marketable as virgin pellets; and (7) certain
potential conflicts of interest exist.
Although the offering memoranda represented that the
Sentinel EPE recycler was a unique machine, it was not unique.
Several machines capable of densifying low density materials were
already on the market in 1981. Other plastics recycling machines
available during 1981 ranged in price from $20,000 to $200,000,
including the Foremost Densilator, Nelmor/Weiss Densification
System (Regenolux), Buss-Condux Plastcompactor, and Cumberland
Granulator. See Provizer v. Commissioner, T.C. Memo. 1992-177.
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