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understatement penalty under section 6661 or the valuation
overstatement penalty under section 6659 could apply to the
proposed charitable contributions. The Memorandum stated that:
Investors should be aware, however, that these
penalties exist, and, that the activities in which the
Partnership will engage, and certain of the tax
positions which it intends to take, are of the sort at
which the penalties are directed. For example, a
substantial charitable deduction will be claimed, the
amount of which is based upon an appraisal. The value
of the charitable contribution could be the subject of
a valuation dispute, and there is no assurance that the
Partnership would ultimately prevail in a dispute on
this issue. If questioned by the Service, the issue of
valuation may be resolvable only by litigation.
The Memorandum warned that "A PROSPECTIVE INVESTOR SHOULD
OBTAIN PROFESSIONAL GUIDANCE FROM HIS OWN TAX ADVISOR IN
EVALUATING THE TAX RISKS INVOLVED." This warning was made
repeatedly throughout the Memorandum.
The Memorandum also stated that the summary of the Federal
income tax consequences "was prepared under the direction of the
law firm of Petralia, Webb & Bersani, P.C. * * * which has agreed
to make itself available to answer the questions of potential
investors, and which will develop, at closing, its opinion of the
major tax consequences of an investment".
Attached as an exhibit to the Memorandum was a copy of the
November 1, 1985, purchase and sale agreement between the
partnership's initial general partner and the Institution of
Mercy.
After the November 1, 1985, purchase and sale agreement was
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