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Mr. Lincir did not know the particulars of such arrangements,
however, and he had no knowledge of whether FTI/Merit compensated
Mr. Schenkman directly.
In 1978, Mr. Lincir invested approximately $225,000 in the
FTI/Merit programs. FTI/Merit provided information concerning
the tax ramifications of Mr. Lincir's investments directly to Mr.
Schenkman; that information was not provided to Mr. Lincir first.
Mr. Schenkman told petitioners that the deductions generated by
the FTI/Merit program were in accordance with the tax laws.
The following table is derived from petitioners' Federal
income tax returns for the years at issue. The table compares
petitioners' salary income from their businesses with their
"supplemental" losses from FTI/Merit reported on their Schedules
4797, Supplemental Schedule of Gains and Losses:
Year Salary Income FTI/Merit Losses
1978 $278,600 ($248,013)
1979 278,170 (342,638)
1980 230,000 (430,840)
1981 248,000 (143,469)
1982 302,000 (257,290)
The large losses did not concern Mr. Lincir; he had "total
confidence" in Mr. Schenkman and felt that bigger gains would
come later, because that was the way the program was described.
Mr. Schenkman proposed other investment opportunities to
petitioners, but they did not accept any such investment
recommendations.
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