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percent of the convent property was to be donated in 1985 and the
remainder in 1986.
The Memorandum outlined the tax benefits and the tax risks
to investors attributable to the donation of the convent
property. The Memorandum explained that:
The Partnership has engaged an independent real estate
appraiser to determine the fair market value of the
convent building. His appraisal is not expected to be
completed before this offering closes. The value of
the proposed gift is a question of fact, and there can
be no assurance that, if the Partnership is audited by
the Internal Revenue Service, such value will be
accepted. The Internal Revenue Service may engage on
its own an independent appraiser to value the
charitable gift, and it is possible that the Service
will arrive at a different value. The Partnership may
have to resort to litigation to settle the issue.
The Memorandum repeatedly cautioned that the Internal Revenue
Service might challenge the valuation of the convent property.
In a section entitled "Risk Factors", the Memorandum warned
that:
There can be no assurance that the value the
Partnership will claim for the charitable deduction
will be accepted by the Internal Revenue Service in the
event of an audit of the Partnership's tax return. If
the valuation is contested and a lower valuation
results, the Partnership (and, hence, each Partner),
will have disallowed, to that extent, a portion of its
charitable deduction. * * * along with the assessment
of interest on the deficiency and also the possible
assessment of penalties, including the substantial
overvaluation penalty (see Tax Aspects) which is equal
to 30% of the deficiency in tax caused by the
overvaluation.
In the subsection "Additions to Tax - Penalties & Interest",
the Memorandum explained in detail that the substantial
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