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two major limitations of the property: (1) The sulphur content
in the coal was too high to comply with Environmental Protection
Agency requirements, and (2) the amount of coal on the property
was insufficient to support the purportedly planned mining
operation. This significant information was not disclosed in the
OM.
In order to invest in one unit of the S-J partnerships, an
individual investor would generally contribute $30,000 in cash to
one of the partnerships and sign a nonrecourse promissory note
for $126,000. In general, each limited partner's contribution in
the S-J partnerships constituted $1 of cash contributed for each
approximate $4 of nonrecourse debt.
Investor funds received on sale of partnership interests
were not used to mine coal. Instead, most of the funds were used
to pay commissions to promoters, including petitioner.
The S-J partnerships did not earn operating income and did
not function as a trade or business in 1976.
The partnerships received approximately $20 million from
investors for sale of limited partnership interests. Most of the
funds from sale of partnership interests were received by the S-J
partnerships by the end of December 1976.
Petitioner received and exercised dominion and control for
his personal benefit over at least $1,968,364 of the funds
received from sale of S-J partnership interests.
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