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regardless of any technology that might be developed by the R&D
contractor; and (9) there was the likelihood of audit by the IRS.
Indeed, the discussion concerning the tax risks associated with
an investment in San Nicholas constituted half of the section on
“Risk Factors”.
The offering memorandum also included projections of
revenue, cashflow, and taxable income or loss. Investors were
warned, however, that those projections, which had been prepared
for the general partner, had not been audited and that they
should not be relied on to indicate the actual results that might
be attained.
I. Petitioner’s 1983 Schedule K-1 and Income Tax Return
Petitioner received a Schedule K-1, Partner’s Share of
Income, Credits, Deductions, etc., from San Nicholas for 1983.
The Schedule K-1 reported that petitioner’s distributive share of
partnership loss from San Nicholas was $12,354 for that year.
Petitioner timely filed a Federal income tax return, Form
1040, for 1983.11 Petitioner attached to his return Schedule E,
Supplemental Income Schedule, and claimed thereon a loss from San
Nicholas in the amount of $12,354. Petitioner then offset this
loss against his other income. See supra “A”.
11 The return was prepared by Lee R. Jeppson, Jr. (Mr.
Jeppson), a member of an accounting firm in Riverside,
California. In preparing petitioner’s return, Mr. Jeppson relied
on the Schedule K-1 that was provided by petitioner.
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