Pamela Osowski - Page 4




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          discounted at 14 percent.1  The PPM projections predicted that              
          the total up-front investment by Degree in the energy management            
          systems equipment would be $292,500 in 1981, which means that the           
          net present value of Degree's net receipts was a negative                   
          $111,272 ($181,228 less $292,500).                                          
               Degree claimed that it placed the energy management systems            
          equipment in service during 1981 and that the equipment had a tax           
          basis and fair market value of $8,040,000.  Grade's claimed share           
          of the basis in the equipment was $1,339,464 (16.6666 percent               
          times $8,040,000), and petitioner’s claimed share of that basis             
          was $93,800 (7 percent times $1,339,464).  The equipment had a              
          true fair market value of no more than $354,000, and Degree's               
          claimed fair market value and tax basis of the equipment exceeded           
          the equipment's true fair market value by approximately 2,271               
          percent.                                                                    
               Petitioner never read the PPM, and she never discussed the             
          PPM with Mr. Mallin.  Before participating in Degree, petitioner            
          had no experience in the development, operation, or marketing of            
          energy management systems, she had no knowledge of the components           
          and equipment constituting the energy management systems                    
          equipment, and she had no knowledge of whether or not the energy            
          management systems equipment was installed in Milor Corporation.            


          1 The yield on long-term U.S. Treasury bonds was generally                  
          14 percent in 1981.                                                         




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