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Since the tax applications of an investment in the
Partnership vary for each investor, neither the Partnership,
the General Partner nor counsel assumes any responsibility
for tax consequences of this transaction to an investor.
* * * The respective investors are urged to consult their
own tax advisers with respect to the tax implications of
this investment. * * *
The opinion letter referenced in the private placement
memorandum was one which purportedly had been written for Mr.
Cole by outside counsel based on information provided by Mr.
Cole. The letter, dated December 7, 1983, concludes by stating
general caveats and disclaimers along with the opinion that “it
is more likely than not that a partner of Arid Land Research
Partners, a Limited Partnership will prevail on the merits of
each material tax issue presented herein.” However, the
conclusions regarding the issue of the section 174 deduction in
particular were vague and nonconclusive in nature.
Finally, the investor subscription agreement accompanying
the private placement memorandum required a subscriber upon
purchase of an interest to aver that:
He understands that an investment in the Partnership is
speculative and involves a high degree of risk, there is no
assurance as to the tax treatment of items of Partnership
income, gain, loss, deductions of credit and it may not be
possible for him to liquidate his investment in the
Partnership.
As the result of partnership level proceedings concerning
Arid Land Research Partners, this Court ultimately entered a
decision disallowing in full the partnership’s claimed ordinary
loss of $463,688 for taxable year 1983. This decision was based
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Last modified: May 25, 2011