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therefore, be considered only by persons who have a
substantial net worth and substantial present and
anticipated income and who can afford to lose all of
their cash investment and all or a portion of their
anticipated tax benefits.” The offering memorandum
went on to enumerate significant business and tax risks
associated with an investment in Whitman. Among those
risks, the offering memorandum stated: (1) There was a
substantial likelihood of audit by the Internal Revenue
Service, and the purchase price paid by F&G to ECI
might be challenged as being in excess of the fair
market value; (2) the partnership had no prior
operating history; (3) the management of the
partnership’s business would be dependent on the
services of the general partner, who had limited
experience in marketing recycling or similar equipment;
(4) the limited partners would have no control over the
conduct of the partnership’s business; (5) there were
no assurances that market prices for virgin resin would
remain at their current costs per pound or that the
recycled pellets would be as marketable as virgin
pellets; and (6) certain potential conflicts of
interest existed.
The offering memorandum informed investors that
the Whitman transactions would be executed
simultaneously.
The offering memorandum prominently touted the
anticipated tax benefits for the initial year of
investment for an investor in the partnership. In this
regard, the offering memorandum stated, in part, as
follows:
The principal tax benefits expected from
an investment in the Partnership are to be
derived from the Limited Partner’s share of
investment and energy tax credits and tax
deductions expected to be generated by the
Partnership in 1982. The tax benefits on a
per Unit basis are as follows:
Projected Regular Projected
Investment and Tax
Payment Energy Tax Credits Deductions
1982 $50,000 $77,000 $38,940
The Limited Partners are not liable for any
additional payment beyond their cash
investment for their Units, nor are they
subject to any further assessment. [Id.]
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