Robert D. and Patricia K. Kaliban, et al. - Page 10

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            to receive a minimum of $60,000 and up to $140,000 from each                              
                  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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