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tax return, the Rolands reported gross income from wages,
interest, dividends, State and local tax refunds, and capital
gains in excess of $236,000.
Roland acquired a 1.547-percent interest in Poly Reclamation
for $12,500 in 1981. As a result of the investment in Poly
Reclamation, on their 1981 Federal income tax return the Rolands
claimed an operating loss in the amount of $9,977 and an
investment tax and business energy credit in the amount of
$21,584. Respondent disallowed the Rolands' claimed operating
losses and credits related to Poly Reclamation in full.
Roland learned of the Plastics Recycling transactions and
Poly Reclamation from Alter. Alter told Roland that he and
others at Shea & Gould were investing in a Plastics Recycling
transaction and that Roland could participate as well if he
wished. Roland discussed the Plastics Recycling transactions
with Alter and Feinstein. He understood that Feinstein had
conducted most of the research into the Plastics Recycling
transactions, but at trial Roland could not recall what research
Feinstein had done. Roland did not know and did not ask what the
assets of Poly Reclamation were. At trial, he could not recall
who manufactured the Sentinel recyclers or whether Feinstein or
Alter had investigated suitable end-users for the machines or had
inquired about existing competition. Roland did not read the
Poly Reclamation offering memorandum or otherwise learn about the
investment apart from discussing it with Alter and Feinstein. He
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