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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.
A section entitled “Tax Aspects” contains the following
information concerning a legal opinion from outside counsel
obtained by the general partner:
The General Partner has received an opinion of counsel
concerning certain of the tax aspects of this investment.
The opinion * * * is available from the General Partner.
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.
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