- 7 - credits. The parties further stipulated that in 1982 the recyclers were not properly valued at $1,750,000 each but instead had a maximum value of only $30,000 to $50,000 each. On its 1982, 1983, and 1984 tax returns, Hamilton reported net ordinary losses of $713,291, $36,205, and $16,720, respectively. The losses and credits reported by Hamilton on its tax returns were passed through to Hamilton’s limited partners. The portions attributable to petitioners, respectively, were included on Schedules K-1 (Form 1120S), Partners Share of Income, Credits, Deductions, Inc., issued to them and filed with Hamilton’s tax returns. B. The Private Offering Memorandum Generally, Hamilton distributed a private offering memorandum to potential investors. The offering memorandum informed investors that Hamilton’s business would be conducted in accordance with the transaction described above. The offering memorandum also warned potential investors of significant business and tax risks associated with investing in Hamilton. Specifically, the offering memorandum warned potential investors that: (1) There was a substantial likelihood of an audit by the Internal Revenue Service (IRS); (2) “On audit, the purchase price of the Sentinel EPS Recyclers to be paid by F&G to ECI may be challenged by the * * * [IRS] as being in excess of the fair market value thereof, a practice followed by * * * [the IRS] in transactions it deems to be tax shelters”; (3) thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011