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Federal Income Tax Consequences: An investment in the
Units involves material tax risks, some of which are set
forth below. Each prospective investor is urged to consult
his own tax advisor with respect to complex federal (as well
as state and local) income tax consequences of such an
investment.
* * * * * * *
(c) Validity of Tax Deductions and Allocations.
The partnership will claim all deductions for
federal income tax purposes which it reasonably
believes it is entitled to claim. There can be no
assurance that these deductions may not be contested or
disallowed by the Service * * * . Such areas of
challenge may include * * * expenditures under the R &
D contract * * * .
* * * * * * *
The Service is presently vigorously auditing
partnerships, scrutinizing in particular certain
claimed tax deductions. * * * Counsel’s opinion is
rendered as of the date hereof based upon the
representations of the General Partner * * * . Counsel
shall not review the Partnership’s tax returns. * * *
(d) Deductibility of Research and Experimental
Expenditures.
The General Partner anticipates that a substantial
portion of the capital contributions of the Limited
Partners to the Partnership will be used for research
and experimental expenditures of the type generally
covered by Section 174 of the Code. However,
prospective investors should be aware that there is
little published authority dealing with the specific
types of expenditures which will qualify as research or
experimental expenditures within the meaning of Section
174, and most of the expenditures contemplated by the
Partnership have not been the subject of any prior
cases or administrative determinations.
There are various theories under which such deductions
might be disallowed or required to be deferred. * * * No
ruling by the Service has been or will be sought regarding
deductibility of the proposed expenditures under Section 174
of the Code.
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Last modified: May 25, 2011