5
distribution costs) to satisfy the lease payments for the
Book Properties relating to each Literary Work a very
substantial number of Books will have to be sold. * * *
The number of Books required to be sold to return a profit
to the Partnership in almost all cases greatly exceeds the
industry average. * * *
Accordingly, there is a high degree of probability that
exploitation of the Book Properties relating to any one of
the Literary Works will not yield a profit to the
Partnership and that an investor may not recoup all or any
portion of his cash investment in the Partnership.
Similarly, the Memorandum for Series 124 stated:
Although the appraisals support the value of Properties on
both the Lessor and Partnership levels, there is no
guarantee that all or any of the Books or Disks will achieve
the level of sales necessary to result in Partnership
profits. The Services Contractors have agreed to use their
best efforts but are not bound by any minimum performance
requirement.
In addition, the private placement memoranda for Series 98
and Series 124 included unsigned proposed tax opinion letters.
The letter for Series 98 cautions:
Although the opinions may be deemed an indication of the
fair market value of the Book Properties, they will be
estimates only, and cannot be regarded as definitive with
respect thereto. It is highly likely that unless a Book
achieves substantial sales, the IRS will not agree with the
appraised value therefor. We have made no independent
investigation as to the fair market value of any of the Book
Properties.
Petitioner decided to invest in Series 98 and Series 124
based upon the information contained in the offering materials.
His review of these materials primarily focused on the cash-flow
analyses and the proposed tax opinion letters. Petitioners
invested $6,250 in Series 98 in 1982, and in 1983 they invested
$6,250 in Series 124. Petitioners invested with others in the
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