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that he was aware of the varying degrees of recyclability of
plastic scrap depending on the process used by a manufacturer to
mold plastic into a particular product. Petitioner was also
aware of the varying qualities of resin pellets made from
recycled plastic scrap depending on the "effectiveness" of the
recycling equipment. Yet petitioner did very little to
investigate his investment in a partnership formed to lease
Sentinel EPE recyclers at the exorbitant cost of $1,162,667 each
to ensure that they were in fact "effective" in producing
marketable resin pellets. The record clearly indicates that if
it were not for the promised tax benefits, a sophisticated
individual such as petitioner would not have invested in a
partnership that leased Sentinel EPE recyclers at 20 times their
value. We are convinced that petitioner would not have invested
in Clearwater were it not for the prospect of the sizable tax
benefits that the investment in Clearwater offered.
Petitioners next present us with the so-called oil crisis
argument. They assert that while representing BP, petitioner
learned about the so-called oil crisis and the likelihood that
the price of plastic would increase in future years because
plastic is an oil derivative. According to petitioners, it was
therefore reasonable to conclude that the Clearwater investment
would be profitable.
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