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Clearwater, on their 1981 Federal income tax return the Webers
claimed an operating loss in the amount of $10,002 and an
investment tax and business energy credit in the amount of
$21,584.10 Respondent disallowed the Webers' claimed operating
losses and credits related to Clearwater in full.
Alter introduced the Plastics Recycling transactions and
Clearwater to the Webers in 1981. As he recalled: "I informed
them of its availability and told them that I was investing in it
and if they were interested they could participate as well." The
Webers decided to invest in Clearwater after discussing it with
Alter and Feinstein. Alter specifically recalled that he
explained to the Webers the nature of the investment and what
might come out of this investment. Aside from speaking with
Alter, the Webers did not conduct any personal investigation with
respect to Clearwater.
9(...continued)
interest in the profits, losses, and capital of Clearwater during
taxable year 1981. However, in their petition, the Webers stated
that they owned a one-quarter interest in a partnership unit, and
several of the 1981 Schedules K-1, Partner's Share of Income,
Credits, Deductions, etc. attached to Clearwater's 1981
partnership return (the Webers' 1981 Schedule K-1 was not among
them), indicate that an investment of $12,500 yielded a 1.547-
percent interest in Clearwater.
10 On their 1981 return, the Webers claimed total credits in
the amount of $21,655.
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