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assisted Mr. Lincir with incorporating petitioners' businesses,
establishing a system for payroll taxes, and preparing
petitioners' Federal income tax returns. Mr. Schenkman helped
petitioners to establish a retirement program, which invested its
assets in gold.
Mr. Schenkman also provided Mr. Lincir with information
about the FTI/Merit promotions. Mr. Schenkman worked with a
representative of FTI, Rusty London, "more or less * * * as a
team" concerning FTI/Merit and its clients. Mr. Schenkman billed
Mr. London for the time Mr. Schenkman expended in lining up
clients for FTI/Merit. Mr. Schenkman routinely disclosed to his
clients this financial arrangement with Mr. London.
Mr. Schenkman explained to Mr. Lincir that, for tax
purposes, the FTI/Merit program would generate gains in the form
of long-term capital gains, and losses as ordinary losses. Mr.
Lincir shared this knowledge with Mrs. Lincir. Mr. Schenkman
also provided Mr. Lincir with a private placement memorandum
about the FTI/Merit program. Mr. Lincir tried to read this
document but did not understand it.4
Mr. Lincir assumed that Mr. Schenkman profited in some way
from the business generated by referring clients to FTI/Merit.
4 The stipulations in this case reflect that the FTI/Merit
programs in which petitioners participated took three forms--a
gold cash-and-carry program, the trading of options in T-bill
futures contracts, and the trading of stock forward contracts.
Mr. Lincir apparently considered the changes in form of the
FTI/Merit promotion to be a continuation of the same program; as
he understood it, "the Tax Code had been changed or something and
you can't use gold anymore."
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Last modified: May 25, 2011