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statements out of context. We are unwilling to do that.
As the trier of fact, “it is our duty to listen to the
testimony, observe the demeanor of the witnesses, weigh the
evidence, and determine what we believe.” Kropp v. Commissioner,
T.C. Memo. 2000-148; cf. Diaz v. Commissioner, 58 T.C. 560, 564
(1972). In the present cases, we are convinced that petitioner
invested in Whitman principally because the investment offered
immediate tax benefits in excess of his investment. We are
convinced that petitioner was determined to reap those benefits
if at all possible.
Petitioner consulted with Thompson for two reasons. First,
petitioner was uncertain how to convert his share of the
partnership’s basis in the recyclers as reported on the 1982
Schedule K-1 into tax credits on his individual return. This is
borne out by the opening sentence of Thompson’s letter, which
states that petitioner retained the firm to review the offering
memorandum “for the purpose of preparing and advising you with
respect to Form 3468 to be filed with your 1982 tax return.”
(Emphasis added.) This statement suggests that the filing of
Form 3468 with the sought-after tax credits was virtually a
foregone conclusion.
Petitioner also consulted Thompson because petitioner was
sensitive to the magnitude of the tax benefits shown on his 1982
Schedule K-1, and he was concerned that the magnitude of those
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