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probably will be challenged as being in excess of fair market
value;3 (2) Northeast has 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 Northeast's 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.
The Sentinel EPE recycler had a "nuts and bolts", or
manufacturing, cost of $18,000. It was a simple batch type
machine designed to grind expanded polyethylene foam and film
into a densified form called "popcorn" that could be further
processed to produce resin pellets suitable for some uses in the
plastics industry. The Sentinel EPE recycler was incapable of
recycling low density polyethylene by itself and had to be used
in connection with grinders, extruders, and pelletizers.
Operation of the Sentinel EPE recycler was performed by low wage
factory help with minimal training. The Sentinel EPE recyclers
3 The offering memorandum notes that "Such purchase price is
the basis for computing the regular investment and energy tax
credits to be claimed by the Partnership" and that "if a
challenge by the [Internal Revenue] Service with respect to the
fair market value of the Sentinel Recyclers * * * were
successfully made, all or part of the regular investment and
energy tax credits * * * would be lost."
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Last modified: May 25, 2011