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of the product of the recyclers. Service and installation costs
were to be borne by the end-user. End-users were also required
to use their best efforts to recycle 220 pounds an hour for 16
hours per week. Only PI was to service or repair the recyclers.
No arm's-length negotiations for the price of the Sentinel
EPE recyclers took place among PI, ECI, and F&G. All of the
monthly payments required among the entities in the above
transactions offset each other. These transactions occurred
simultaneously.
Clearwater leased Sentinel EPE recyclers from F&G and
licensed those recyclers to FMEC. For convenience, we refer to
the series of transactions among PI, ECI, F&G, Clearwater, and
FMEC as the Clearwater transactions.
By private placement memorandum dated November 17, 1981,
Clearwater offered subscriptions for 16 limited partnership units
at $50,000 per unit. The limited partners owned 99 percent of
Clearwater, and the general partner, Samuel L. Winer, owned the
remaining 1 percent. Each limited partner was required to have a
minimum net worth, exclusive of his principal home, furnishings,
and automobiles, in the amount of $200,000 per limited
partnership unit. In addition, each partner was required to have
enough income during the 1981 taxable year to place the limited
partner in an income tax bracket of at least 50 percent.
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