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Associates was a limited partner in a partnership known as Taylor
Recycling Associates (Taylor). Taylor was a first-tier TEFRA
partnership involved in plastics recycling. Taylor was involved
in a series of transactions similar to those of the Clearwater
Group partnership, which was the subject of Provizer v.
Commissioner, T.C. Memo. 1992-177, affd. per curiam without
published opinion 996 F.2d 1216 (6th Cir. 1993). In Provizer,
this Court found that assets valued at $1,162,666 had a fair
market value not exceeding $50,000. The Court also held that the
Clearwater Group transactions were a sham and lacked economic
substance.
In 1988, a partnership proceeding captioned Taylor Recycling
Associates, D L & K Associates, A Partner Other Than the Tax
Matters Partner v. Commissioner, docket No. 10184-88 (the Taylor
case) was commenced in this Court on behalf of Taylor. On July
21, 1994, the Court entered decision in the Taylor case pursuant
to the Commissioner's motion for entry of decision under Rule
248(b). All deductions and credits claimed by Taylor in
connection with its plastics recycling activities were
disallowed.
Pursuant to the Taylor decision, in 1995, respondent
assessed petitioners $9,835 in tax and approximately $40,000 in
interest. Having not heard anything about their investment for
approximately 13 years, petitioners were initially convinced that
respondent had made a mistake. Upon learning that they were in
fact liable for the assessed amounts pursuant to the Taylor
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